JGBS: 30Y Underperforming AT Lunch Ahead Of Supply
Jul-03 02:55
At the Tokyo lunch break, JGB futures are weaker, -9 compared to the settlement levels.
- Cash US tsys are 1-2bps richer, with a steepening bias, in today's Asia-Pac session ahead of today's heavy US data calendar that includes June NFP. US markets are closed on Friday for the 4th of July Holiday.
- Cash JGBs are slightly mixed across benchmarks, with the 2-year outperforming (0.5bp richer) and the 30-year underperforming. The benchmark 30-year yield is 1.3bps higher at 2.907% ahead of today's supply.
- Last month’s 30-year bond auction delivered poor results, suggesting weak investor demand. The low price fell short of dealer expectations of 92.00, per the Bloomberg survey. Moreover, the cover ratio fell to 2.9215x from 3.0739x, and the auction tail lengthened significantly to 0.49 from 0.30, both indicating a marked deterioration in bidding strength.
- This month’s 30-year JGB auction features an outright yield approximately the same as last month’s issuance. Notably, the current yield is 25-30bs below its cycle high of 3.20%.
- Against this backdrop, today’s 30-year auction will serve as a real test of investor appetite. Ultra-long maturities remain a soft spot in the market, and their performance will be key in determining whether recent volatility continues.
- Swap rates are flat to 1bp lower. Swap spreads are mixed.
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JGBS AUCTION: 10Y Supply Faces A Higher Yield But A Similar Curve
Jun-03 02:52
The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 8 May 2025. This month’s auction offers an outright yield 25bps higher than last month and approximately 10bps below the recent cyclical high of 1.596% reached in late March, just prior to President Trump’s announcement on reciprocal tariffs.
- However, the 2s/10s and 7s/10s yield curves are around a similar level to last month.
- Notably, investor sentiment toward longer-dated global bonds has weakened since early May, albeit having improved slightly over the past week.
- Bank of Japan Governor Ueda, speaking in parliament, said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants. Additionally, he pointed out that sharp movements in long-term yields could influence short-term rates.
- Against this backdrop, it remains to be seen whether the current 10-year yield level will be sufficient to draw strong demand in today’s auction.
- Results are due at 0435 BST / 1235 JT.
JGBS AUCTION: PREVIEW - 10-Year JGB Auction Due
Jun-03 02:42
The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 8 May 2025: the auction drew cover of 2.5440x at an average yield of 1.274%, an average price of 101.10, a high yield of 1.294%, a low price of 100.92, with 44.9598% of bids allotted at the high yield.
- Last month’s auction revealed weak results, with the low price falling short of expectations, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 2.5440x from 3.1475x, and the tail lengthened to 0.18 from 0.11.
- This performance came with an outright yield 10-15bps lower than the prior month and approximately 30bps below the recent cyclical high of 1.596% reached in late March, just before President Trump's announcement on reciprocal tariffs.
- Results are due at 0435 BST / 1235 JT.
JGBS: Modest Twist-Flattener, BoJ Talks In Parliament With Speech Later Today
Jun-03 02:32
At the Tokyo lunch break, JGB futures are weaker, -17 compared to the settlement levels.
- Bank of Japan Governor Ueda, speaking in parliament, emphasised that trade uncertainties remain extremely high and are unlikely to ease even after tariff issues are resolved. He noted that the BoJ's baseline economic scenario could change significantly due to external conditions. Ueda reiterated there is no preset plan for interest rate hikes, which will only occur if economic and price conditions improve as expected. Despite this, the bias remains toward further rate increases. He also said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants. Additionally, he pointed out that sharp movements in long-term yields could influence short-term rates.
- Note as well Governor Ueda will speak later today at 4:50pm local time.
- Cash US tsys are flat to 1bp cheaper, with a steepening bias, in today's Asia-Pac session after yesterday's sell-off.
- Cash JGBs are 1bp cheaper to 2bps richer across benchmarks, with a flattening bias. The benchmark 10-year yield is 0.9bps higher at 1.522% ahead of today's supply.
- Swap rates are flat to 1bp higher. Swap spreads are mixed.
