Twisting Flatter

JGB futures stuck to a narrow range during Tokyo trade, dealing either side of late overnight levels to sit -11 ahead of the bell. 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 ~1.0bp cheaper to ~2.5bp richer across the curve, as 20+-Year paper richens.

• There hasn’t been much in the way of meaningful domestic headline flow to note today, with the monthly trade balance data revealing a record wide deficit in adjusted terms, while core machinery orders data 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:
• to 3-Year: 1.99x (prev. 1.80x)
• 5- to 10-Year: 2.13x (prev. 2.97x)
• 25+-Year: 3.61x (prev. 3.44x)
• JGB futures initially nudged lower during the Toko afternoon, perhaps on spill over from the wider core global FI moves linked to the RBNZ monetary policy decision, before regaining some poise, aided by the downtick in the offer/cover ratio for Rinban operations covering JGBs with 5- to 10-Years until maturity.
• Looking ahead, 20-Year JGB supply provides the focal point of tomorrow’s domestic docket.