Long End Leads Way Lower

JGBs have cheapened as Tokyo plays catch up to the post-FOMC dynamic after Thursday’s holiday, with the major cash benchmarks running little changed to 5bp cheaper, as the long end leads the way lower. 10-Year yields remain capped by the upper boundary of the BoJ’s YCC mechanism, representing the only major benchmark to not have cheapened in early Tokyo dealing.

• JGB futures are -35, with little in the way of technical support observed until the 21 Oct low (147.38), although that is over 1 big figure away from current levels. Note that the primary trend direction for the contract remains lower, with the gains from the aforementioned 21 Oct low deemed corrective.
• Broader international dynamics are in the driving seat, with Finance Minister Suzuki pointing to the need for stable financing sources to facilitate an increase in defence spending, while the government cabinet has OK’d the release of some of Japan’s reserve funds to pay for grain imports. Neither of these domestic matters are market movers.