Twisting Flatter

JGB futures stuck to a very narrow range during the Tokyo morning, dealing either side of late overnight levels before hitting the lunch bell -12. When it comes to wider cash JGB trade it would seem that the curve took direction from the twist flattening of the U.S. Tsy curve on Tuesday, which we suggested may be the case ahead of the Tokyo open, with the major benchmarks running 1bp cheaper to 2bp richer across the curve, as 20+-Year paper richens.

• There hasn’t been much in the way of meaningful domestic headline flow, with the monthly trade balance data revealing a record wide deficit in adjusted terms, while core machinery orders was marginally softer than expected, but still rose in M/M terms. These data points failed to impact the space, as is the norm.
• BoJ Rinban operations yielded the following offer/cover ratios:
• 1- to 3-Year: 1.99x (prev. 1.80x)
• 5- to 10-Year: 2.13x (prev. 2.97x)
• 25+-Year: 3.61x (prev. 3.44x)
• There shouldn’t be much impact from these cover ratios, outside of the potential for light support for the 5- to 10-Year zone.