Light Underperformance In The Belly

2s and 40s outperformed on the cash curve in morning trade, with the 3-7 year sector running weaker on the day, as the softness in the belly weighed on futures as we ground through the morning, after a brief look through the overnight highs. The contract finished the morning session -5 vs. settlement.

• Both of the buckets covered by the BoJ's 3-10 Year Rinban ops saw a widening of spreads and very modest upticks in cover ratios, although there wasn't any evidence of notable selling, with the 5-10 Year offer/cover holding comfortably below 2.00x.
• Soft core machine orders triggered a downgrade in the Japanese government's view on the space.
• 12-Month Bill supply is due this afternoon.