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Little Changed On The Day

JGBS

JGB futures are -10 ahead of the Tokyo close and haven’t ever threatened neutral levels. Meanwhile the wider JGB curve sees the major benchmarks running 0.5bp cheaper to 0.5bp richer on the day, with the early and post-20-Year auction rounds of strength in the super-long end fading.

  • The modest, early bid in JGB futures faded a little as we moved into the Tokyo lunch break, with futures -15 at the lunch bell. This may have been influenced by the super-long end of the cash JGB curve pulling back from firmest levels of the day in setup for this afternoon’s 20-Year JGB supply.
  • In terms of specifics, the 20-Year JGB auction was absorbed smoothly enough, with the low price printing comfortably above wider expectations, while the price tail narrowed when compared to the previous auction. On the other hand, the cover ratio painted a slightly weaker picture of demand, moderating to 3.28x from the previous auction’s 3.63x, a little below the six-auction average of 3.37x. As highlighted in our preview, the richening observed in 20s away from cycle cheaps as well as its richening on the 10-/20-/30-Year butterfly since June, likely provided headwinds for demand. Still, the auction priced well, likely aided by the continued home bias for Japanese investors, amidst elevated FX-hedging costs and continued market volatility. These factors probably meant that demand from life insurers for super-long JGBs remained evident, in line with their previously outlined investment intentions.
  • Domestic headline flow was on the light side, with little in the way of clear catalyst evident for the super-long ends movement away from the afternoon’s richest levels.
  • A quick reminder that the latest batch of weekly international security flow data out of Japan revealed foreign investors recorded net buying of Japanese bonds for the third straight week (and also for the seventh time in eight weeks, largely representing short covering after the ultimately failed challenge of the BoJ's YCC parameters in June).
  • Looking ahead, national CPI data headlines the domestic docket on Friday.
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JGB futures are -10 ahead of the Tokyo close and haven’t ever threatened neutral levels. Meanwhile the wider JGB curve sees the major benchmarks running 0.5bp cheaper to 0.5bp richer on the day, with the early and post-20-Year auction rounds of strength in the super-long end fading.

  • The modest, early bid in JGB futures faded a little as we moved into the Tokyo lunch break, with futures -15 at the lunch bell. This may have been influenced by the super-long end of the cash JGB curve pulling back from firmest levels of the day in setup for this afternoon’s 20-Year JGB supply.
  • In terms of specifics, the 20-Year JGB auction was absorbed smoothly enough, with the low price printing comfortably above wider expectations, while the price tail narrowed when compared to the previous auction. On the other hand, the cover ratio painted a slightly weaker picture of demand, moderating to 3.28x from the previous auction’s 3.63x, a little below the six-auction average of 3.37x. As highlighted in our preview, the richening observed in 20s away from cycle cheaps as well as its richening on the 10-/20-/30-Year butterfly since June, likely provided headwinds for demand. Still, the auction priced well, likely aided by the continued home bias for Japanese investors, amidst elevated FX-hedging costs and continued market volatility. These factors probably meant that demand from life insurers for super-long JGBs remained evident, in line with their previously outlined investment intentions.
  • Domestic headline flow was on the light side, with little in the way of clear catalyst evident for the super-long ends movement away from the afternoon’s richest levels.
  • A quick reminder that the latest batch of weekly international security flow data out of Japan revealed foreign investors recorded net buying of Japanese bonds for the third straight week (and also for the seventh time in eight weeks, largely representing short covering after the ultimately failed challenge of the BoJ's YCC parameters in June).
  • Looking ahead, national CPI data headlines the domestic docket on Friday.