Move Away From Session Cheaps Holds Into Close

JGBs recovered from session cheaps after futures initially extended on their overnight session downtick, with spill over from a bid in wider core global FI markets providing some impetus early on.

• Futures are -13 into the bell, while cash JGBs deal either side of unchanged with little in the way of uniform direction noted. 10s have been limited by their proximity of the upper boundary of the BoJ’s YCC settings.
• Domestic headline flow continues to be centred on all things BoJ, with the latest Nikkei survey revealing that all 20 respondents said that “the Bank will likely revise the yield curve control tool sometime this year.”
• Elsewhere, there was confirmation that the government’s choices for the BoJ leadership positions will appear in their respective lower house hearings on 24 February.
• 5-Year JGB supply went well, even with the coupon on the new line being adjusted lower (0.2% vs. last month’s new 0.3% line), adding a fresh firming bias to afternoon trade.
• Local data flow generated a slightly narrower than expected trade deficit for January (although we still saw the widest headline monthly trade deficit on record), alongside softer than expected core machine orders, although that didn’t move the needle for the space.
• Tomorrow’s local docket is virtually empty.