Long Swap Paying Helps Space Lower

JGB futures extended on their overnight weakness, but have recovered from worst levels, with the contract -14 as we move towards the close. 7s represented the weak point on the cash curve all day. Longer dated swap spreads were wider, suggesting paying here helped the weakness in cash JGBs.

• The Nikkei reported that Japanese PM Abe will make an appearance on Friday. Abe is expected to address his well-documented health issues.
• Late Tuesday saw ratings agency Fitch note that Japan's single-A rating would be negatively impacted if the country reverses the recent consumption tax hike, with the country's debt outlook now leaning toward negative.
• Elsewhere, local reports have suggested that the government will extend its employment subsidy scheme through year end.
• Japanese Economy Minister Nishimura pointing to no rush re: the consideration of a formal basic income scheme.
• BoJ Rinban ops saw the size of 1-10 Year JGB purchases remain unchanged. The breakdown saw a softer offer/cover and narrower spread in the 1-3 Year ops, while the 3-10 Year ops saw a marginal uptick in cover and wider spreads.
• 2-Year supply is slated for tomorrow.