Richer After Smooth Digestion Of 5-Year Supply, CPI Tomorrow

JGB futures are trading on a high note in Tokyo afternoon trading, +11 compared to settlement levels, after 5-year supply goes well with the auction low price aligning with dealer expectations, the tail decreasing and the cover ratio improving to 3.850x compared to 3.703x in the previous month's auction.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined weekly investment flow data and speech by BoJ Board Member Asahi Noguchi. (See link, ICYMI)
• With the local calendar thin today, local participants have likely been on headlines and US tsys watch.
• Cash US tsys are flat to 1bp cheaper across benchmarks in Asia-Pac trade with TYU3 dealing at 113-07+, -2+ versus NY closing levels.
• Cash JGBs are richer in afternoon trading with a twist flattening of the curve, pivoting at the 2-year zone. The benchmark 10-year yield is 0.8bp lower at 0.374%, below the BoJ's YCC limit of 0.50%.
• The 5-year JGB remains unchanged after the auction, hovering near the lower end of the morning's range at 0.072%, a decrease of 0.3bp for the day.
• Swap spreads are generally wider beyond the 1-year zone.
• The local calendar tomorrow sees the release of May CPI along with the Jibun Bank PMI data.
• Tomorrow will also see BoJ Rinban operations covering 1- to 25-Year JGBs.