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Richer After 5Y Supply, US CPI Data Tonight


JGB futures are sharply richer, +22 compared to settlement levels, after today’s 5-year supply sees mixed results. The auction's low price beat dealer expectations but the cover ratio declined relative to the previous month's auction. The tail also lengthened slightly.

  • Nonetheless, today’s result stood out relative to recent 2-, 10-, and 30-year supply, which experienced greater challenges in market digestion. However, it's important to note that the result still fell short of presenting a convincingly robust outcome.
  • There hasn’t been much in the way of domestic data drivers to flag, outside of the previously outlined Nov PPI data, which came close to expectations. The print is unlikely to shift BOJ thinking ahead of next week's policy meeting.
  • US tsys are 1-3bps richer in the Asia-Pac session ahead of tonight's US CPI data.
  • The cash JGB curve has twist-flattened, pivoting at the 2s, with yields 1.3bps higher to 2.4bps lower. The benchmark 10-year yield is 1.6bps lower at 0.749% versus the morning high of 0.778%.
  • The swap curve is richer, with swap spreads mixed.
  • Tomorrow, the local calendar sees the Tankan Mfg and Non-Mfg Indices, along with BOJ Rinban operations covering 1-3-year, 5-10-year, and 25-year+ JGBs.

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