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Long-End Underperforming Ahead Of 40Y Supply

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At the Tokyo lunch break, JGB futures are holding a small gain, +4 compared to the settlement levels.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Trade Balance and Machine Orders data.
  • The cash JGB curve has slightly twist-steepened, pivoting at the 5s, with yields -0.5bp to +1.6bps. The benchmark 10-year yield is 0.5bp higher at 0.985% after hitting a new cycle high of 0.988%.
  • The 40-year yield is 1.6bps higher at 2.504% ahead of today’s supply.
  • The late March auction of 40-year JGBs received a strong reception, with the actual high yield falling below dealer expectations. This positive outcome was further highlighted by an increase in the cover ratio, which rose to 2.487x from the 2.148x seen in the late January auction. Notably, January's cover ratio was the lowest for a 40-year auction since March 2022.
  • Currently, the 40-year auction yield is approximately 60bps higher than in late March, reaching the highest level since 2008. Additionally, the 20/40 yield curve is at a cycle high of 70bps.
  • The swaps curve has bear-steepened, with rates flat to 2bps higher.
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At the Tokyo lunch break, JGB futures are holding a small gain, +4 compared to the settlement levels.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Trade Balance and Machine Orders data.
  • The cash JGB curve has slightly twist-steepened, pivoting at the 5s, with yields -0.5bp to +1.6bps. The benchmark 10-year yield is 0.5bp higher at 0.985% after hitting a new cycle high of 0.988%.
  • The 40-year yield is 1.6bps higher at 2.504% ahead of today’s supply.
  • The late March auction of 40-year JGBs received a strong reception, with the actual high yield falling below dealer expectations. This positive outcome was further highlighted by an increase in the cover ratio, which rose to 2.487x from the 2.148x seen in the late January auction. Notably, January's cover ratio was the lowest for a 40-year auction since March 2022.
  • Currently, the 40-year auction yield is approximately 60bps higher than in late March, reaching the highest level since 2008. Additionally, the 20/40 yield curve is at a cycle high of 70bps.
  • The swaps curve has bear-steepened, with rates flat to 2bps higher.