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Twist-Flattener, Heavy Local Calendar Tomorrow Incl Tokyo CPI & 2Y Supply

JGBS

JGB futures are stronger and at session highs, +17 compared to the settlement levels, after more than reversing the gap lower that followed the release of the BoJ Summary of Opinions for the March MPM.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined BoJ Summary of Opinions (March MPM) and Weekly International Investment Flows.
  • (Bloomberg) -- Japanese bonds suffered the heaviest selling by foreign investors in more than a year last week, as the country’s central bank raised its short-term policy rate for the first time in 17 years. (See link)
  • This morning’s BoJ Rinban operations saw negative spreads and lower offer cover ratios (3-5-year: 1.43x, 5-10-year: 1.49x and 10-25-year: 2.52x). This appeared to generate some support in the early rounds of the Tokyo afternoon session.
  • The cash JGB curve has twist-flattened, pivoting at the 2s, with yield movements bounded by +1.2bps (1-year) and -4.4bps (40-year). The benchmark 10-year yield is 1.8bp lower at 0.707% versus the YTD high of 0.801%.
  • Swap rates are mostly lower. Swap spreads are tighter out to the 10-year and wider beyond.
  • Tomorrow, the local calendar sees Tokyo CPI, Jobless Rate, Job-To-Applicant Ratio, Retail Sales, Industrial Production and Housing Starts data, along with 2-year supply.

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