Steeper On Tokyo’s Post-FOMC Catch Up

JGB were subjected to post-FOMC catch up pressure after Thursday’s Japanese holiday, which saw the space on the defensive for most of Friday’s trade, before the wider core FI complex firmed (as we have outlined elsewhere), which allowed the space to edge away from cheapest levels of the day.

• Cash JGBs are little changed to ~5.5bp cheaper, with the super-long end leading the weakness. 10s remain capped by the upper limit of the BoJ’s YCC mechanism. JGB futures are -40, ~15 ticks off lows and ~100 ticks away from key technical support.
• Local news flow saw familiar rhetoric from Finance Minister Suzuki re: the JPY and the need for sound finances.
• Meanwhile, the Japanese cabinet OK’d the release of some the country’s reserve funds to pay for grain imports.
• Late in the session saw a couple of source reports do the rounds, pointing to requirements of ~Y22.8tn of bond issuance to finance the Japanese supplementary budget, providing a bit of a limit to the tick away from session cheaps for the space. The same reports indicated a record Japanese tax take in the current FY.
• 10-Year JGBi supply headlines the domestic docket on Monday.