BOJ: Rinban Purchase Offer
The BoJ offers to buy a total of Y1.7tn of JGBs from the market:
- Y425bn worth of JGBs with 1-3 Years until maturity
- Y500bn worth of JGBs with 3-5 Years until maturity
- Y575bn worth of JGBs with 5-10 Years until maturity
- Y200bn worth of JGBs with 10-25 Years until maturity
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BOJ: Fixed Rate Purchase Offer
The BoJ offers to buy an unlimited amount of 5- to 10-Year JGBs at a fixed rate of 0.50%.
US SWAPS: J.P.Morgan: Position For Narrower Spreads In 7-Year Sector
Late on Friday J.P.Morgan wrote “swap spreads in intermediate maturities such as the 7-Year sector are currently wide relative to fair value. Moreover, it is worth noting that bank demand for U.S. Tsys stemming from deposit growth is one of the factors in our model for benchmark swap spreads. In the current environment, characterized by YtD deposit losses and a flat outlook at best for deposits over the remainder of the year, we estimate that bank demand for U.S. Tsys has turned negative. This persistent absence of demand for U.S. Tsys from banks will likely weigh on swap spreads and bias them narrower going forward.”
- They issued the received 7-Year swap spread trading recommendation with the swap spread trading at -28.4bp.
JGBS: Futures Cheaper In Early Tokyo Trade
JGB futures initially built slightly on the downtick in post-Tokyo trade ahead of the weekend, before recovering from early Tokyo lows to sit -8.
- In the absence of economic data releases or notable news, local participants' reaction to the cheapening in US Tsys trading ahead of the weekend likely influenced the Tokyo open, along with the aforementioned speculation that the BoJ may begin the assessment of its ultra-loose policy settings later this week (third party newswire reports had said that the Sankei suggested this "would" take place this week, although that has now been corrected to "may"), although the review is unlikely to result in any policy moves in isolation (it could shape future YCC moves/abandonment).
- JBM3 remains comfortably in the range of 147.40-147.92, which it has generally traded in since early April, barring a few probes through the lower limit last week.
- MNI's technical analyst suggests that the decline in JGB futures to the previous week's low of 147.27 may be considered a corrective move. If the futures surpass the 20-day EMA at 147.65, it could draw attention towards the Mar 22 high of 149.53. On the other hand, if the futures drop below 147.27, it may indicate a more profound retracement towards the March 13 low of 145.80.
- Cash JGB curve twist flattens with yields in the 1-3-year zone 0.1-0.7bp higher and yields beyond 0.1-0.8bp lower.
- Swap rates are a touch higher across much of the curve.
