Morning Strength Pared Ahead Of 2Y Supply, Cautious BOJ Nakamura

At the Tokyo lunch break, JGB futures are richer but off the session’s best level, +18 compared to the settlement levels, having pared the extension of overnight gains seen early in today’s Tokyo session.

• In addition to the morning’s previously outlined data drop, the market has had a speech from BOJ Board Member Nakamura to digest. Bloomberg reported that Nakamura said it will take a little more time before the bank can adjust monetary policy, as it needs to act with caution. It is worth noting that Nakamura was the only dissenter in the nine-member policy board when the BOJ added flexibility to its yield curve control program in July and October. (See link)
• Later on today, housing starts and consumer confidence are due.
• Cash US tsys are little changed so far in the Asia-Pac session.
• Cash JGBs are dealing mixed, reversing this morning’s strong bull-flattening, with yields 1.3bps higher (30-year) to 1.9bps lower (40-year). The benchmark 10-year yield is 1.7bps lower at 0.655% versus the cycle high of 0.97% set in late October and the BOJ's 1% YCC reference rate.
• The 2-year, 0.5bp lower at 0.041%, is underperforming on the curve ahead of today’s supply.
• The swaps curve has maintained its bull-flattening, albeit less dramatic, with swap spreads narrower out to the 30-year.