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Overnight Losses Pared Ahead Of 20Y Supply, Light Local Calendar


In Tokyo morning trade, JGB futures are cheaper, -12 compared to settlement levels, but have pared overnight losses.

  • The local calendar is light today, with the Tertiary Industry Index out later as the sole release.
  • Accordingly, local participants are likely monitoring US tsys in the Asia-Pac session after overnight's bear-steepening. Cash US tsys have opened flat to 1bp richer.
  • Cash JGBs are slightly cheaper today, with yields 0.1bp to 1.2bps higher. The benchmark 10-year yield is 0.3bp higher at 0.764%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814%.
  • The 20-year JGB is dealing 0.8bp cheaper at 1.547%, underperforming on the curve, ahead of today’s supply. While one might expect that a yield similar to what was observed at last month’s auction should yield a similarly positive result today, it's crucial to recognise that recent auctions of longer-dated securities suggest that local investors may be leaning towards seeking higher yields.
  • The swaps curve is dealing slightly mixed, with rates 0.1bp lower to 1.0bp higher. Swap spreads are generally tighter.

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