Steeper To Start The Week

JGB futures nudged higher during the Tokyo session, after an initial downtick in reaction to weekend headline flow surrounding the Chinese ZCS situation and source reports pointing to back-channel U.S.-Russia talks re: the prevention of further escalation when it comes to the Ukrainian war.

• Still, the contract’s trading band was contained, with any rally limited by super-long end weakness on catch-up to the twist steepening pressure seen in U.S. Tsys on Friday (which has moderated from extremes during Monday’s Asia-Pac session).
• Futures print +6 into the bell, off best levels. The major cash JGB benchmarks run 1bp richer to 1.5bp cheaper across the curve, with 7s outperforming as the curve pivots around 20s.
• In local news, RTRS sources noted that 2-Year JGB issuance will increase by Y100bn during the current FY, along with a boost for 6-month bill issuance, as part of the government’s plan to fund its latest fiscal support package.
• 10-Year JGBi supply passed smoothly. The BoJ’s desire to attempt to generate meaningful wage growth via the maintenance of ultra-loose policy settings, in a bid to garner demand-pull inflationary pressure, likely facilitated smooth takedown.
• Looking ahead, Tuesday’s local docket will be headlined by the latest round of household spending and wage data, with BoJ Rinban operations covering 1- to 10-Year JGBs also due.