Weakness in Super-Long End Extends

The aforementioned weakness in the super-long end of the JGB curve extended into the lunch break, with 20+-Year paper running 12-15bp cheaper, meaning that curve steepening became more pronounced as the remainder of the cash JGB benchmarks were 1bp richer to 4bp cheaper.

• A reminder that fresh long end weakness was seen on the back of the Y50bn purchases that were deployed in the BoJ’s Rinban covering the 25+-Year zone. This amount is below the lower boundary of the BoJ’s Y100-300bn purchase band for the sector, which was outlined in its monthly Rinban plan. Prevailing market conditions seemingly emboldening the BoJ when it comes to trimming the size of longer dated purchases. JGB futures ticked higher into the lunch bell, closing -21.
• Policymaker rhetoric continues to play down any worry surrounding the Japanese banking sector in the wake of the SVB meltdown, while outgoing BoJ Governor Kuroda is rehashing rhetoric that was deployed at last week’s press conference re: monetary policy during his tenure and in the time ahead.
• Cover ratios seen in the Rinban operations covering 1- to 10-Year paper were low to average (1.2-2.5x, rising across maturity buckets), while the reduction in the purchase size in the 25+-Year bucket meant that the cover ratio there jumped (4.7x).