JPY Swaps: Bid after Tokyo inflation spike; Curve steeper

Steep grades 15 Jun 2020
The spike in Tokyo inflation has backed paying in JPY swaps, but the lack of flow saw some wilder price move. The curve steepened up.

Start a free trial to read this article

Join today to access all  Total Derivatives content and breaking news. Already a subscriber? Please Log In to continue reading.

Or contact our Sales Team to discuss subscription options.

Get in Touch

  • Bond future slumps as Tokyo inflation spikes

  • Light 2-10y bid; 2s/7s and 2s/10s steeper

  • New issues


Click here for SDR JPY IRS trades


Bond future slumps as Tokyo inflation spikes

JGB future slumped today, following a surprise in domestic data and sluggish demand at the auction.


Official data released earlier today showed that inflation in Tokyo was up 3.8% year-on-year in November, up from 3.5% in the previous month and above economists’ expectations of 3.6%


The MOF sold JPY2.4996trn worth of its JPY2.5trn 5-year 0.005% JGBs (Number 15R) at tender today. The auction drew bids worth 2.35 times, down slightly from 2.70 times last month. Average yield was 1.58%. The tail tightened from 2.70 last month to 2.35.


JGB future fell soon after market open, and the momentum intensified in the afternoon after the JGB auction. In mid-afternoon Tokyo trading the lead bond future was down 46-ticks at 148.92, and the yield on the benchmark 10-year JGB was up half a basis point to 0.248%.



Light 2-10y bid; 2s/7s and 2s/10s steeper

Trading in swaps has been subdued today. A dealer reported sporadic paying in swaps since market open. The source reckoned players would stay in a cautious mode until the release of domestic unemployment and retails sales data near the middle of next week.


According to the source, 10-year swaps traded mostly in a tight range around 4.75bps higher of 0.555% in the morning, but was further paid up to 0.57% after lunch break.


2s/10s swaps steepened up by 1.75bps to 44.25bps, despite a couple of paying in 2-year at a basis point higher of 0.1175% up until mid-day.


2s/7s swaps, on the other hand, steepened up by 1.75bps to 27.5bps amid paying in 7-year. Another player noticed 7-year bid at up to 3.5bps higher of 0.4% in the afternoon session but blamed the big move in price to lack of trade flow on the day.



New issues

  • Honda Finance raised JPY30bn via selling bonds in two equal tranches as follows:


    • 0.495%, December 20, 2027 at JGBs + 39bps.

    • 0.3%, December 19, 2025.