Off Lows On Global FI Bid & Unscheduled BoJ Rinban After YCC Breach, Curve Twist Flattens

Pressure from the spill over stemming from Tuesday’s moves in wider core global FI markets lingered in the belly during the Tokyo morning, with limited reaction to the BoJ deploying an unscheduled round of Rinban purchases covering 5- to 25-Year paper as it looked to fend off the latest upside breach of its YCC band (which has lingered, although the 0.51% level has not been touched as of yet). Futures edged away from session lows alongside wider core global FI markets, before another modest uptick was seen after the Rinban purchases were announced. That left the contract -17 at the lunch break, while wider cash JGBs were 1bp cheaper to 3.5bp richer as the curve twist flattened (20+-Year paper has firmed on the day).

• Recently released details of the unscheduled Rinban ops revealed an uptick in cover ratios (3.3x for the 5- to 10-Year and 3.0x for the 10- to 25-Year), although the offers that the operations attracted weren’t larger in nominal terms, with cover impacted by the downsizing of the operations vs. scheduled purchases.
• BoJ’s Tamura added little fresh to the policy debate, underscoring the importance of wage dynamics in Japan, while flagging the risk of higher-than-expected inflation and reiterating the need for continued easing at present, although conceding that a policy framework and inflation target review is needed at some point.
• Marginally firmer than expected services PPI data will have added to the pressure in early Tokyo trade.