Ticking Along

It was a sedate Tokyo session for JGB futures, with the contract continuing to operate in familiar territory, finishing +4 on the day.

• The cash curve saw light twist steepening for most of the session, given the potential for additional 40-Year JGB issuance (as outlined by primary JGB dealers at recent MoF meetings and flagged previously), which could be deployed to finance the latest supplementary budget (although, as outlined previously, total issuance requirements for the package will seemingly be in the region of the median view, avoiding the more burdensome end of the scale. The maturity mix of the issuance will be key).
• Late in the day we saw local press reports suggest that the supplementary budget will see the Japanese government set aside another Y1tn for its Go To travel campaign (the scheme will be halted over the New Year period, given the current COVID worry, with PM Suga battling against a continued slide in the opinion polls).
• Flash PMIs and monthly trade balance data headline the local docket on Wednesday.