Long End Leads The Morning Bid

Marginally weaker than expected Tokyo CPI data, BoJ Governor Kuroda’s continued focus on generating sustainable wage growth and the aforementioned Sino-U.S. tensions re: Taiwan provided a modest bid for the JGB space during the Tokyo morning. That left JGB futures +6 come the lunch bell, more than reversing overnight session losses, while the wider cash curve bull flattened as the major benchmarks richened by 0.5-2.0bp. 20s outperformed after the sector led yesterday’s cheapening.

• Note that the flattening was also aided by reports that Japan is looking to finance its planned increase in defence spending via bridge bonds, with a focus on relatively short-term debt and clear stipulations re: financing methods in an effort to play down fiscal worries.