BOJ: Fixed Rate Purchase Offer​

JGB futures reverse overnight weakness in early Tokyo trade on news that Japanese trust banks bought a record amount of super-long JGBs last month. JBU3 is currently dealing at 148.63, +14 compared to settlement levels, after closing post-Tokyo trade at -10.

• According to the latest data from the Japan Securities Dealers, trust banks, often seen as proxies to pension funds, purchased ¥1.27 trillion of debt with original maturities of more than 10 years and ¥938 billion of 10-year notes. (see link)
• Cash JGBs are richer across the curve beyond the 1-year zone with the curve flatter led by the 20-year zone (-1.8bp). The benchmark 10-year yield is 1.5bp lower at 0.385%, below the BoJ's YCC limit of 0.50%. The 5-year benchmark is 0.7bp lower at 0.073%, ahead of supply later in the week.
• The swap curve bull flattens with swap spreads tighter across the curve.
• The local data calendar has the final April Industrial Production readings, along with April Capacity Utilisation out later today. The final May Machine Tool Orders print is also due.

USD/JPY has broken above 142.00. We currently track just below highs, last in the 142.10/15 region. This is fresh highs for the year and we are just below 142.25, the Nov 21 2022 high. A move above that level then targets 142.51, 61.8% of the Oct 16 2022 - Jan 16 bear leg.

• Oct/Nov 2022 levels above 145.00 may beckon then.
• Yen weakness is in line with the firmer US yield tone in the first part of trade today, with cash bond markets re-opening after the long weekend (yields are 4.1 to 5.7bps firmer across the curve).
• Still, comments have crossed from FinMin Suzuki on FX markets. They are in line with recent rhetoric, with the Suzuki noting that the authorities are watching moves on a daily basis. This has helped USD/JPY move off session highs, albeit only modestly (the pair last 142.05/10).