Long End Leads The Bid

Another day of firm demand for super-long JGBs has supported the broader JGB space, with the major cash JGB benchmarks running little changed to 3bp richer as the curve bull flattens. This dynamic has allowed futures to nudge higher, paring overnight losses, albeit operating within the confines of a narrow range, hitting the lunch bell -1 on the day.

• Note that the aforementioned bid in the longer end seems to be driven by interest in JGBs, with super-long swap spreads a little wider on the session.
• A slightly firmer than expected PPI print has headlined when it comes to domestic news flow, although there was still a moderation in the rate observed in the headline Y/Y reading (to +8.6% from +9.4%).
• Elsewhere, Japanese Finance Minister Suzuki noted that protecting the fiscal health of the nation is his most important task, while highlighting the severe fiscal issues facing the country.
• The breakdown of the latest BoJ Rinban operations revealed the following offer/cover ratios:
• 1- to 3-Year: 1.80x (prev. 2.66x)
• 3- to 5-Year: 3.13x (prev. 3.22x)
• 5- to 10-Year: 2.97x (prev. 2.04x)
• We wouldn’t expect these results to have much impact on the space during the early rounds of Tokyo afternoon dealing.