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JGBS: Cash Bonds Cheaper After A Poor 10Y Auction, Focus On FOMC

JGBS
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JGB futures are weaker and at Tokyo session lows, -24 compared to settlement levels.

  • Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag other than a poor 10-year auction.
  • The 10-year JGB auction showed weaker results, with the low price falling short of expectations. Moreover, the cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.
  • This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
  • Weak sentiment toward global long-end bonds impacted today’s auction.
  • Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
  • Cash JGBs are 2-3bps cheaper across benchmarks beyond the 1-year. The benchmark 10-year yield is 3.2bps higher at 1.011% versus the cycle high of 1.101%.
  • The swap curve has bear-steepened with rates 1-6bps higher. Swap spreads are mixed.
  • Tomorrow, the local calendar will see Household Spending and Weekly International Investment Flow data alongside the Coincident and Leading Indices. 
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JGB futures are weaker and at Tokyo session lows, -24 compared to settlement levels.

  • Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag other than a poor 10-year auction.
  • The 10-year JGB auction showed weaker results, with the low price falling short of expectations. Moreover, the cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.
  • This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
  • Weak sentiment toward global long-end bonds impacted today’s auction.
  • Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
  • Cash JGBs are 2-3bps cheaper across benchmarks beyond the 1-year. The benchmark 10-year yield is 3.2bps higher at 1.011% versus the cycle high of 1.101%.
  • The swap curve has bear-steepened with rates 1-6bps higher. Swap spreads are mixed.
  • Tomorrow, the local calendar will see Household Spending and Weekly International Investment Flow data alongside the Coincident and Leading Indices.