Reception Of 30-Year Supply Results In Light Flattening

JGB outperformed wider core FI markets during the Tokyo afternoon aided by a solid enough round of 30-Year JGB supply. That leaves Futures +10, a touch shy of best levels, with the contract sticking comfortably within the confines of the range established in the overnight session. Cash JGBs are little changed to 1.0bp richer across the curve.

• In terms of auction specifics, the low price came in above broader dealer expectations, while the price tail held steady when compared to the previous auction as the cover ratio (3.245x) came in virtually in line with the six-auction average (3.239x). Lifer demand, stemming from a steep JGB curve, market vol. and elevated FX-hedging costs likely allowed the low price to top wider expectations, while impaired market functioning (albeit off of extremes) and the same general market vol. likely prevented broader participation.
• BBG’s latest BoJ sources piece noted that the BoJ is fully committed to its easing stance, while noting that it is set to adjust its forecast for CPI in the current FY to 2% or more (the latest sources piece to suggest such a move) in addition to considering an upward revision to its CPI forecast for next FY. The piece also suggested that the Bank will consider marking down its economic growth forecast for the current FY.
• Note that Tokyo’s local government has started to discuss the possibility of deploying fresh COVID curbs in the city, although Japanese Deputy Chief Cabinet Secretary Kihara has noted that the national government is not considering deploying COVID restrictions at present, with flexible measures to be deployed as necessary.
• Household spending & BoP data headline the domestic docket on Friday.