Yields Higher, Apart From The 10Y, 5Y Supply Results Due

At the Tokyo lunch break, JGB futures are holding an uptick, +3 compared to the settlement levels, after dealing in a narrow range.

• Today, the local calendar will see the Consumer Confidence Index and Machine Tool Orders data later.
• Cash JGBs are mostly cheaper, apart from the 10-year. The 30-40-year bucket is underperforming with yields around 2bps higher. In contrast, the benchmark 10-year yield is 1.4bps lower at 0.788% after setting a fresh YTD high of 0.802% yesterday.
• The 5-year yield is 0.3bp higher at 0.389% ahead of today’s supply results. Today's auction also comes on the heels of a strong 10-year JGB auction in April.
• Crucially, that 10-year offering marked the inaugural auction for the new fiscal year and represented the first unveiling of the 10-year supply since the BoJ removed its negative interest rate policy (NIRP).
• Accordingly, that outcome established an optimistic tone for a market that has experienced mounting pressure since mid-December, fueled by expectations of policy tightening from the BoJ.
• The swaps curve has twist-steepened, pivoting at the 20s, with rates 2bps lower to 2bps higher. Swap spreads are tighter out to the 7-year and wider beyond.