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Very Strong 2Y Auction Drives Twist-Steepening Of Cash Curve

JGBS

JGB futures have pushed into positive territory, +7 compared to the settlement levels, after today's very strong 2-year JGB auction.

  • The 2-year bond supply demonstrated very strong demand metrics, even with the prospect of further tightening from the BoJ. The low price beat dealer expectations and the cover ratio increased to a very robust 5.542x (highest since 2019) from 4.187x in July. The auction tail was also slightly shorter than last month.
  • Today's strong auction result stands in stark contrast to the lacklustre demand seen in this month's 5- and 10-year auctions.
  • Outside of the previously outlined weekly international investment flows, there hasn't been much in the way of domestic data drivers to flag. The Consumer Confidence Index is due later.
  • Cash US tsys are little changed in today’s Asia-Pac session. Nvidia’s results and Fed Bostick’s remarks aftermarket have had little impact.
  • The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 2bps lower to 1bp higher. The benchmark 2-year yield is 2.0bps lower at 0.362% after today’s supply.
  • The swaps curve has also twist-steepened, with rates 1bp lower to 4bps higher.
  • Tomorrow, the local calendar will see labour market, Tokyo CPI, Industrial Production, Retail Sales and Housing Starts data.

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