Twist Flattening Holds

Little to really add to our earlier bullets, with JGB futures hitting the lunch bell -36 after ticking back towards their morning base, while the major cash JGB benchmarks run 2bp cheaper to 2bp richer. The aforementioned twist flattening theme is still intact.

• Looking at the recently released breakdown of the offer/cover ratios seen in the latest BoJ Rinban operations, the standout point was the uptick in the willingness in the market’s will to test the BoJ’s resolve re: its current YCC settings, with the cover ratio for the 5- to 10-Year purchases sitting at 3.75x, even with the purchase offer lifted to the maximum operational amount outlined in the BoJ’s quarterly calendar. Cover ratios elsewhere were sub-2.00x.
• Participants will be on the lookout for unscheduled BoJ Rinban and fixed rate operations in the afternoon, with domestic matters (namely BoJ speculation) clearly dominating any spill over from the bid observed in wider core global FI markets (excluding the bid seen in 30+-Year paper).