Twist Steepening Early On

Early Tokyo trade saw JGB futures adjust lower, unwinding the rally observed in the final overnight session of last week in the wake of Monday’s cheapening in wider core global FI markets. That leaves the contract dealing in a narrow range around unchanged levels, with wider market gyrations set to dominate given the lack of meaningful domestic news flow to digest since Friday’s Tokyo close. Moves on the cash JGB curve haven’t been uniform, with the presence of today’s 1- to 10-Year BoJ Rinban operations and the recent moderation in the odds of the U.S. Federal Reserve deploying a 100bp hike later this month supporting paper out to 10s, while 20+-Year paper has cheapened. That leaves the major benchmarks running 1bp richer to 2bp cheaper, with 5s providing the firmest point on the curve, while 20s represent the weakest point.