Twisting Steeper

Spill over from the U.S. Tsy space has seemingly applied some pressure to the super-long end of the JGB curve (30s and 40s), with twist steepening in play in the JGB space as the Fed gets set to implement its quantitative tightening program from today (some reaction to the cheapening of longer dated U.S. Tsys observed since the NY open is also feeding in). Remember that the BoJ has less relative control over the longer end of the JGB curve, which is likely promoting the twist steepening. Note that the 5- to 7-Year zone outperformed during the Tokyo morning, with the major JGB benchmarks running 1bp richer to 2bp cheaper across the curve. The outperformance in the belly was once again likely linked to BoJ control, given the continued presence of 10-Year JGB fixed rate operations to fortify the upper end of the Bank’s permitted 10-Year JGB yield trading range (10s last yield 0.24%, ~1bp off the upper limit of the aforementioned band). This allowed JGB futures to unwind their overnight losses and more, hitting the lunch bell +4 vs. yesterday’s settlement

• Domestic Q1 data was mixed, with capex disappointing and company profits beating.
• Elsewhere, BoJ Deputy Governor Wakatabe maintained his usual reflationist tone.