Solid 20Y Auction Fails To Strengthen Market

JGB futures are weaker at 143.49, -9 compared to the settlement levels, after initially surging to a new session high of 143.58 following the results of today’s 20-year supply.

• 20-year supply went smoothly, with the low price beating dealer expectations and the auction tail ticking shorter. However, the cover ratio decreased versus last month’s auction. Today’s result is likely to be seen as consistent with the positive tone set at June’s 10- and 30-year JGB auctions.
• Outside of the previously outlined PPI Services, there hasn't been much in the way of domestic data drivers to flag. Leading & Coincident Indices and Machine Tool Orders data are due later today.
• (Bloomberg) Japanese bank shares including Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group climb on growing expectations the BoJ will raise interest rates as early as next month, and as investors rotated into lagging value stocks. (See link)
• The cash JGB curve has twist-steepened, pivoting at the 7s, with yields 1bp lower to 2bps higher. The benchmark 10-year yield is 0.6bp higher at 1.002% versus the cycle high of 1.101%.
• Swap rates are flat to slightly lower out to the 30-year and 4bps higher beyond. Swap spreads are mixed.
• Tomorrow, the local calendar is empty, ahead of Retail Sales and weekly International Investment Flow data on Thursday. Thursday also sees 2-year supply.