Sliding Into The Close

JGB futures have faltered into the bell, with participants seemingly unimpressed by the demand for the latest 1tn of 5-Year loans offered to banks via the BoJ’s Funds-Supplying Operations against Pooled Collateral channel (demand was actually a little higher than that seen at last week’s offering, while the average rate applied to the operation was a incrementally lower, ~30bp below prevailing 5-Year swap rates).

• That leaves the contract on the backfoot into the close, recently registering fresh session lows to print -34, while cash JGBs are 2.5bp cheaper to 0.5bp richer as 7s lead the sell off on the weakness in futures, while the curve twist flattens with a pivot around 20s.
• Local data had no tangible impact on the space.
• Local headline flow was dominated by comments from Finance Minister Suzuki, who outlined the government’s agreement with the BoJ view re: the need for more meaningful wage increases, while stressing that it is too early to discuss the idea of a revision to the BoJ-government accord (likely eying the impending departure of Governor Kuroda as the tipping point on that front).
• There was smooth enough digestion of the latest 2-Year JGB auction.
• Final manufacturing PMI data headlines the local docket on Wednesday.