Off Best Levels Alongside Wider Core FI, Eyes On YCC Tolerance Band

Cash JGBs run flat to 1bp cheaper across the curve, with the belly leading the weakness as futures move away from best levels alongside wider core FI markets. JGB futures print -9 on the day.

• As we flagged on several occasions during the Tokyo morning, the proximity of 10-Year JGB yields to the upper end of the BoJ’s permitted trading band likely insulated the space from registering meaningful losses in early Tokyo dealing, with softer than expected domestic data also helping, as futures reversed overnight losses.
• The super-long end represented the firmest point on the curve all day but has moved away from best levels alongside the remainder of the curve. This comes after that zone hit firmest levels in the wake of a solid round of 30-Year JGB supply.
• Comments from Japanese Finance Minister Suzuki saw a reiteration of well-trodden rhetoric surrounding FX movements, while there was also confirmation that fund requests from Japanese ministries for FY23 totalled Y110tn, in line with press reports, as Japan works towards the compilation of its latest budget.
• Looking ahead to Wednesday, the local docket will be headlined by BoJ Rinban operations covering 1- to 10-Year JGBs.