Lower On Wider Impulse, Domestic Supply Eyed

JGB futures followed core global FI markets lower in overnight dealing (with the move largely driven by US$ & EUR issuance dynamics) extending on their Tokyo weakness, leaving the contract -27 at the close, just above worst levels of the session.

• Comments made overnight by BoJ Governor Kuroda focused on climate change and didn’t move the needle re: general monetary policy matters.
• An MoF official has noted that the Ministry is striving to extend the average duration of JGBs on issue, after the measures was skewed shorter by the issuance that funded the reaction to the COVID pandemic. He also stressed that the current low interest rate regime will not last indefinitely, while stating that coupon rates on JGBs will be determined by underlying market conditions. Elsewhere, he noted that climate transition bonds could be issued in isolation from construction and deficit bonds, as the country looks to fund efforts on climate change, while highlighting an increase in international holdings of JGBs vs. what was seen back in ’13 (which has no doubt been aided by cross-currency basis-related yield pickups on offer for international investors over that period).
• The latest 30-Year JGB auction headlines the domestic docket today, which could extend the supply-related weakness seen during the overnight session in early Tokyo trade.
• Note that Tuesday’s 3-month bill auction, which was postponed owing to technical factors, has been rescheduled for today.