Stronger After 40Y Supply Absorbed Smoothly

In Tokyo afternoon trading, JGB futures are stronger, +13 compared to the settlement levels, after responding positively to the 40-year auction results. The issuance of 40-year bonds encountered a solid reception, with the actual high yield undershooting dealer expectations (1.925% versus the realised yield of 1.905%). Moreover, the cover ratio rose to 2.487x from 2.148x at the January auction.

• There weren’t any domestic data drivers to flag today.
• (Bloomberg) -- BoJ Board Member Naoki Tamura says the manner in which monetary policy is managed is going to be extremely important for a slow, steady normalization to put an end to extraordinarily large-scale easing. (See link ICYMI)
• (Bloomberg) -- The impact of cost-push inflation stemming from imports is expected to ease and people’s livelihood is likely to improve, BoJ Governor Ueda says. (See link ICYMI)
• The cash JGB curve has bull-flattened, with yields flat to 2bps lower. The benchmark 10-year yield is 0.5bp lower at 0.733% versus the YTD high of 0.801%.
• The 40-year yield is 2bps richer in post-auction dealings at 2.072%.
• The swaps curve has twist-steepened, pivoting at the 20s, with rates 3bps lower to 1bp higher. Swap spreads are mixed.
• Tomorrow, the local calendar will see Weekly International Investment Flow data, along with BoJ Rinban operations covering 3- to 25-year JGBs.