Sizeable Japanese Fiscal Stimulus Seemingly Inbound

TYZ1 in a narrow 0-05 range overnight, last +0-03 at 130-17+, after a limited look above Thursday's best level. The curve has seen some very modest twist flattening, with benchmark yields last -/+0.5bp on the day. Reports re: Japanese fiscal matters have helped the space away from best levels, but broader macro headline flow was light overnight. Thursday's U.S. docket will be headlined by weekly jobless claims & regional Fed economic activity indicators, in addition to Fedspeak from Williams, Bostic, Evans & Daly. On the supply front, we will see a 10-Year TIPS auction and the end of month supply announcement from the Tsy.

• JGBs were on the defensive ahead of the close on the back of the latest Nikkei report surrounding the size of the impending fiscal stimulus package, with futures -9 last, while the cash JGB curve twist steepened as issuance worry weighs on the longer end. 20s are still a touch firmer than yesterday's closing levels on the back of the strong 20-Year JGB auction witnessed earlier today. In terms of the details, the Nikkei noted that the Japanese fiscal support package will total Y55.7tn, that is above any expectations that we had seen in circulation, and is much higher than the previously touted ~Y40tn.
• There was little in the way of idiosyncratic matters to really point to re: the latest leg of strength in the ACGB space, with futures registering fresh incremental session highs before backing off from best levels, leaving YM +3.0 & XM +6.5 at the close. A post-auction rally in NZGBs likely provided some trans-Tasman impetus (before firm NZ inflation expectation data unwound the bid in the shorter end of the NZ curve), while the movements in U.S. Tsys (which also sit off of best levels but operate within the confines of a narrow range) and JGBs also provided some input re: ACGB pricing. A quick reminder that we are on the lookout for the pricing of TASCORP's new benchmark sized Jan '33 bond, which is expected later today. Hedging around pricing may weigh on XM futures.