Unscheduled BoJ Fails To Provide Meaningful Support

The major benchmark JGBs have seen a mixed afternoon, with super-long paper recovering from lows, leaving wider cash JGBs little changed to ~2bp cheaper on the day. 7s and 20s provide the weakest points on the curve (tied to a move lower in futures & potential structural demand issues, respectively), while 2s and 10s are little changed, with the latter of course limited by the presence of the BoJ’s YCC scheme. 30+-Year paper is nearly back to flat, perhaps on fresh interest from lifers and pension funds, which seemed to become apparent on Wednesday afternoon as well.

• Futures print -30, at worst levels of the session, and 25 ticks off September’s low, where initial technical support lies. A break there would expose levels not seen since June, when the BoJ’s will re: its YCC scheme was being tested.
• The show higher in yields triggered an unscheduled round of 5- to 25+-Year BoJ Rinban operations (as we suggested may be the case). However, this did little to placate the market, with 10-Year JGB yields immediately showing above the upper limit of the range permitted under the BoJ's YCC (per BBG), while JGB futures nudged lower in the wake of the announcement.
• Tomorrow’s local docket will see the release of national CPI data & 1- to 10-Year BoJ Rinban operations.