Lack Of Unscheduled Rinban Sees Early Weakness Extend

The early cheapening impulse in JGBS, that was seemingly based on Tokyo’s willingness to fade the overnight rally in futures, has extended. We would attribute the extension of the early move to a lack of BoJ Rinban purchases, with the Bank choosing only to deploy the scheduled round of fixed rate operations, holding off from unscheduled operations (as it doesn’t want to harm liquidity further, and given the lack of immediate challenge to its new YCC settings). Futures have more than reversed their early overnight gains, printing -9 at the lunch break.

• Cash JGB trade sees 7 leading the weakness, given the move in futures, dealing 7bp cheaper on the day. Meanwhile, 10s have lodged post-BoJ highs of ~0.46% as the market adjusts to the new YCC settings. The 10-/30-Year curve has flattened by 12bp since yesterday’s YCC tweak, as super-long yields were not confined by the BoJ’s previous YCC settings.
• There hasn’t been much in the way of domestic headline flow to note, outside of Economy Minister Goto trying to reaffirm the message provided by BoJ Governor Kuroda, in that yesterday’s YCC adjustment doesn’t represent a tweak, nor an exit from monetary easing.