Lacklustre Tokyo Trade

JGB futures operated below unchanged levels during Tokyo dealing and were seemingly a little more hesitant to go bid when compared to their global FI counterparts (liquidity/market function/BoJ recalibration worry, or perhaps a combination of the 3, remaining evident), even as some of the major Asia-Pac tech equity indices faltered.

• That leaves the contract -9 ahead of the close with the space off worst levels, while the major cash JGB benchmarks sit little changed to 1bp cheaper as the curve comes under some light steepening pressure.
• There hasn’t been anything in the way of meaningful domestic headline flow to drive the space.
• Today’s sale of 2-Year JGBs saw the cover ratio decline to 3.81x from 5.43x at the previous auction, moving below the six-auction average of 4.65x. The price tail widened a little, although the low price matched dealer expectations (100.100 as per the BBG dealer poll). As we suggested in our preview, this auction was likely supported by domestic investors with capital to deploy, while the wider international investment community would likely stay away on the back of worry re: some form of BoJ recalibration.
• Looking ahead, retail sales data and BoJ Rinban operations headline domestic matters on Wednesday.