JPY Swaps: 7-10y zone steepens more after strong US data; SMBC perpetual bonds

Steep rock climb 25 Mar 2021
Strong US data has prompted further steepening of the JPY swap curve to the 7- to 10-year zone. SMBC issued perpetual bonds in size.

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  • More steepening to the 7-10y zone

  • MOF sold 30y JGBs

  • New issues – Sumitomo Mitsui in perpetual bonds


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More steepening to the 7-10y zone

The JPY rates market opened weaker, following a selloff in US treasuries in overnight trading.


US treasury yields shifted higher on Monday on signs of stronger US economy after some stronger-than-expected ISM and factory order data. This prompted the market to price in nearly 75% chance of another 50bp US Fed hike next week. 2- and 10-year yields spiked by the most in at least a month and the 2s/10s curve inverted to the most since 1981.


The lead bond future was down by 7-ticks soon after market open, but erased losses to gain 13-ticks in mid-morning domestic trading along side similar move in US treasuries in Asian trade. JGB future finally closed the day 1-tick higher at 148.84, and the yield on the benchmark 10-year JGB was up to 0.253% before settling marginally lower at 2.48%.


The swap curve steepened up to the 7- to 10-year zone again, echoing the selloff in JGB future. 7-year swaps were marked 3bps higher at 0.465%, steepening 2s/7s by 1.5bps to 32bps. At time of writing, 10-year was marked 2.5bps higher at 0.6375%, flattening 10s/20s by half a basis point to 42.5bps.



MOF sold 30y JGBs

The MOF sold JPY899.6bn worth of its JPY900bn 30-year 1.4% JGBs (Number 76R) at tender today. The auction drew bids worth 3 times, down from 3.28 times last month. Average yield was 1.481%. The tail widened from 0.11 last month to 0.17.



New issues – Sumitomo Mitsui in perpetual bonds

  • Via Nomura, Heiwa Real Estate REIT raised JPY2bn via selling 0.88%, December 10, 2032 bonds.


  • JHF sold JPY30bn in 0.614%, December 19, 2034 bonds.


  • Major Joint Local Bonds priced JPY87bn of 0.544%, December 24, 2032 bonds at 30.5bps over JGBs.


  • Sumitomo Mitsui raised via Nikko JPY107bn via selling the following perpetual bonds:


    • JPY41bn, 1.75% till December 2032, then JGBs + 1.483%.

    • JPY66bn, 1.534% till December 2028, then JGBs + 1.38%.