IRAN: Iran Calls US Demands Unreasonable

At the Tokyo lunch break, JGB futures are sharply weaker and at session lows, -59 compared to settlement levels, ahead of today’s 10-year supply.

• Cash US tsys are slightly mixed, with a steepening bias, in today's Asia-Pac session after yesterday aggressive sell-off.
• (Bloomberg) " The Iran war is rekindling inflation concerns across financial markets, sapping the outlook for global bonds. Traders have offloaded government debt since Monday as they game-plan how a prolonged conflict in the Middle East may ramp up oil and supercharge inflation."
• Cash JGBs are 2-5bps cheaper across benchmarks out to the 30-year, and 1bp richer beyond. The benchmark 10-year yield is 3.9bps higher at 2.127% versus the cycle high of 2.359%.
• Last month, the 10-year auction delivered weakish results, with the low price failing to meet expectations at 98.75, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.0196x from 3.3037x. The tail was unchanged 0.05.
• This performance came despite an outright yield hovering just below the cycle high, around 15bps higher than the level of prior month's auction.
• This month's auction offers an outright yield 10-15bps below than the level of last month's auction and ~25bps lower that the cycle high.
• Swap rates are 1-2bps higher.

Source: Bloomberg Finance LP

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 3 February 2026. This month's auction offers an outright yield 10-15bps below than the level of last month's auction and ~25bps lower that the cycle high.

• The 2s/10s yield curve is ~10bps flatter last month’s auction and around 35bps below its a cycle high. By contrast, the 7s/10s curve, a measure of value between JB1 futures and the 10-year, is little changed from last month and sits comfortably inside the past year’s range.
• Sentiment toward longer-dated bonds has improved since the recent election as fiscal concerns have eased.
• Bank of Japan Deputy Governor Ryozo Himino said on Monday that volatile financial markets are not an indication that the bank will not take action and if fact there could be a case for the opposite.
• The Bank of Japan doubts household medium- to long-term inflation expectations will weaken despite the slowing year-on-year rise in consumer prices, supporting its stance of gradually raising the policy rate, MNI understands.
• Against this backdrop, it remains to be seen whether the current 10-year yield level will be sufficient to improve demand in today's auction.
• Results are due at 0335 GMT / 1235 JT.

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 3 February 2026. The auction drew cover of 3.0196x at an average yield of 2.249%, an average price of 98.79, a high yield of 2.256%, a low price of 98.74, with 53.5840% of bids allotted at the high yield.

• Last month, the 10-year auction delivered weakish results, with the low price failing to meet expectations at 98.75, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.0196x from 3.3037x. The tail was unchanged 0.05.
• This performance came despite an outright yield hovering just below the cycle high, around 15bps higher than the level of prior month's auction.
• Results are due at 0335 GMT / 1235 JT.