Off Best Levels But Comfortably Richer

JGB futures built on the move away from overnight session (cycle) highs in early afternoon trade, with a particularly poorly received round of 20-Year JGB supply aiding that dynamic after news that Credit Suisse is entering a liquidity pact with the SNB applied pressure during the Tokyo morning. Still, the space held firmer on the day, given the general worry re: banks. JGB futures then kicked higher into the close to sit ~80 ticks firmer on the day ahead of the bell (no catalysts seen), but still reside ~85 ticks shy of post-Tokyo bests.

• Cash JGBs run 4-11bp richer, with 7s outperforming all day given the gains in futures since yesterday’s close, while 10-Year JGB yields sit around 0.29%, trading within the recently established range after the pull away from the BoJ’s YCC cap.
• Swap spreads are unchanged to wider, excluding 10s, where they are tighter.
• In terms of 20-Year auction specifics, there was a wide tail and a low price that was comfortably below general expectations. That came alongside a depressed cover ratio, which printed at the lowest level seen at a 20-Year JGB auction since September’s offering. A reminder that September’s cover ratio represents the lowest level seen at a 20-Year JGB auction since ’12. The recent outright richening, ongoing market vol. and uncertainty re: BoJ Rinban purchases provided the major headwinds for takedown.
• There wasn’t much meaningful domestic headline flow for markets to digest.
• Looking ahead, tomorrow’s local docket is particularly light.