Rinban-Induced Rally

JGBs firmed during the Tokyo morning, on the back of the aforementioned, hastily arranged, wider than initially tabled, BoJ Rinban operations, which included larger than usual purchases in the 3- to 10- & 25+-Year buckets, as the Bank looked to reinforce its commitment to its YCC scheme.

• The market has been bid ever since, with cash JGBs bull flattening, running 1-7bp richer, while JGB-OIS spreads widened, with OIS also pulling back from recent extremes as the BoJ asserted its dovish credentials. 10-Year yields now sit 2bp off the upper end of the Bank’s permitted -/+0.25% trading range.
• Futures finished the morning session a touch shy of best levels, but were still +41 vs. Tuesday’s settlement.
• In terms of the details within the BoJ Rinban operations, there wasn’t much in the way of notable selling on the part of market participants, with all of the offer/cover ratios comfortably below 3.00x (3- to 5-Year: 1.31x, 5- to 10-Year: 2.08x, 10- to 25-Year: 2.77x, 25+-Year: 2.58x).
• We still await details from the BoJ’s fixed rate operations covering 10-Year JGBs.
• Note that BoJ Governor Kuroda has met with PM Kishida (per the Nikkei), although we would suggest that this will be designated a “normal meeting” in any subsequent comments.