Twisting Flatter, Back From Best Levels

The JGB curve has twist flattened, with the major benchmarks running 1.0bp cheaper to 2.5bp richer on the day, pivoting around 5s as the super-long end outperforms.

• The NY session bid in U.S. Tsys provided spill over support for the space during the Tokyo morning, although the (modest in comparison) Asia-Pac softening in U.S. Tsys capped JGB futures shortly after the re-open, meaning that the contract could not challenge its overnight high. The contract then drifted lower into the lunch bell.
• The offer to cover ratios for today’s BoJ Rinban operations can be observed below:
• 1- to 3-Year: 3.31x (prev. 2.62x)
• 5- to 10-Year: 2.48x (prev. 1.86x)
• 25+-Year: 4.73x (prev. 4.79x)
• The uptick in the 1- to 3- & 5- to 10-Year cover ratios seemingly applied some pressure to the space during afternoon dealing, with another modest round of cheapening in U.S. Tsys also playing into JGB softening after the lunch break.
• There hasn’t been much in the way of meaningful domestic headline flow to pick apart, with an extension of the country’s gasoline subsidy scheme providing the highlight, alongside some fairly run-of-the-mill commentary re: FX matters from the upper echelons of the ruling LDP party.