Weakness In Futures Results In Humped Yield Move

JGB futures show just below late morning levels as we head towards the bell, last -20, after recovering from their early Tokyo base and then meandering through the session (initial cheapening was largely driven by spill over from weakness in wider core global FI on Tuesday).

• The wider cash JGB pattern observed in morning trade continues to hold (light cheapening in 7s & 10s owing to futures vs. some richening elsewhere, with super-long paper outperforming).
• Swap rates are flat to ~1.5bp higher, with the 7- to 10-Year zone seeing the biggest move, while super-long swap rates pulled back from early highs on the aforementioned richening in the corresponding JGBs. Swap spreads are wider across the curve and have been all day.
• A Nikkei interview with an MUFG executive revealed a downtick in the average duration of the firm’s JGB holdings, while he suggested that he would only have any real willingness to add to longs in the 10-Year zone of the curve when 10s reached 0.8% or above in yield terms.
• Money stock & weekly international security flow data headline the domestic data docket tomorrow, with the latest liquidity enhancement auction covering off-the-rum 15.5- to 39-Year JGBs also due.