Off Bests At Lunch, Rinban Operations Suggest A Flattening Bias

At the Tokyo lunch break, JGB futures have strengthened but are below session highs, currently trading at 148.81, a gain of 7 points from the settlement levels.

• In response to questions in parliament, BoJ Governor Ueda said he can’t say when the BOJ will achieve its 2% price goal. Adding, saying specifically when the goal will be reached risks creating unnecessary impacts on the market. (link)
• During this morning's BoJ Rinban operations, there were higher spreads and slightly higher cover ratios observed for the 1-3-year and 3-5-year buckets (1-3-year: 1.88x, 3-5-year: 2.36x). However, there was a lower and negative spread, and a slightly lower cover ratio for the 10-25-year bucket (2.23x). These results may exert some minor pressure on the short-end of the JGB curve while providing support for the long-end during the early rounds of the Tokyo afternoon session
• The cash JGBs curve has twist steepened in the morning session with the pivot at the 3-year zone. The benchmark 10-year sees its yield 0.7bp lower at 0.417%, below the BoJ's YCC limit of 0.50%.
• Swap rates are however lower across the curve with swap spreads narrower.