Notable Twist Steepening Into the Weekend

The early twist steepening impulse has developed further during the Tokyo afternoon.

• The bid out to 10s was perhaps aided by reports of gradual tweaks to tax settings in a bid to fund Japanese increased defense spending (slthough the space had already firmed ahead of that news), while 20+-Year paper seemed to fall afoul of ECB-related weakness as domestic participants turned their focus to next week’s BoJ meeting.
• That left futures hovering around neutral levels, operating in a narrow range, while the major cash JGB benchmarks run 1.5bp richer to 6.0bp cheaper, with a pivot around 10s.
• The swap curve has also twist steepened as the day wore on, albeit in a more muted manner than JGBs, taking cues from bonds.
• Next week’s local docket is headlined by the aforementioned BoJ monetary policy decision.