Twist Flattening Apparent, Bid In Futures Abates

The upward momentum evident in JGB futures on Monday and Tuesday (that some have linked to CTA driven short covering flows, as flagged earlier) was not evident on Wednesday, with the contract -2 at the close, while the JGB cash curve twist flattened. The longer end of the swap curve was subjected to some receiving flow during the afternoon, although swap spreads were still wider across most of the curve, even as that space twist flattened. BoJ's Kataoka, a prominent dovish dissenter, deployed his usual narrative, suggesting the BoJ should lower short- and long-term rates by actively purchasing JGBs. Elsewhere, speculation re: the potential extension of the Tokyo area's COVID state of emergency continues to do the rounds, while some have suggested that an announcement on the matter could be made as soon as tomorrow.

• 30-Year JGB supply headlines the local docket on Thursday.