Political Bid

JGBs firm further, with futures last +14, while cash 10s now sit 2.5bp richer on the day, leading the broader rally. The earlier mentioned round of super-long swap receiving has extended and continues to support the broader bid.

• The move seemingly comes down to developments surrounding the LDP Party leadership vote with Kono & Kishida set to compete in a runoff.
• Note that victory in the first round is a boon to Kishida's leadership bid, as the former Foreign Minister has solid backing among lawmakers, whose votes will have a greater weight in the runoff. As a reminder, in the second round of the election each of the 382 LDP lawmakers and each of the 47 local party chapters will get one vote. The gap between Kishida's & Kono's odds of being Japan's Prime Minister come year-end has widened in favour of Kishida, as implied by betting markets.
• As we highlighted earlier, a Kishida-Takaichi pact was in the offing. Takaichi may therefore gain influence in any Kishida-led government, which could have dovish implications for the BoJ, as she favours introducing an employment focus into the BoJ's mandate (which currently focuses on inflationary matters), a la FOMC.