JPY Swaps: Pre-auction 20y bid steepens 10s/20s; 2-way 10y flow

Kyoto bamboo forest
JGB future is weaker after US Fed and domestic trade data. 10s/20s steepened up amid pre-auction paying in 20y. 10y has seen mostly 2-way interest.

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  • 10y JGB yield at recent high after US Fed and domestic trade data

  • Pre-auction 20y bid steepens 10s/20s; 2-way 10y flow


10y JGB yield at recent high after US Fed and domestic trade data

The JPY rates market followed the USD rates market weaker, despite some weaker-than-expected domestic data.


In overnight trading, US treasury yields headed higher after 0.5% worth of US Fed interest rate hike. The hawkish Fed did not tone down and said there would be further interest rate hike to come. UK inflation in November also cooled. However, players said inflation at 10.7% was still a skyrocketing number, and that the BOE would not turn less hawkish amid this minor improvement.


In Japan, data released earlier today showed that the trade deficit in November was wider than economists’ expectation although a slight improvement from the previous period. Tighter deficit was driven mainly by easing imports, which grew by 30.3% year-on-year, down from 53.5% in December. Exports, on the other hand, grew stronger than expected of 20% though still slower than 25.3% in October.


JGB future was down by 22-ticks intraday before being marked 14-ticks lower at 148.06 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was half a basis point higher at recent high of 0.253%.



Pre-auction 20y bid steepens 10s/20s; 2-way 10y flow

Swaps flow has been light as Christmas and year-end approach, not to mention that the market is usually not super busy ahead of the BOJ policy meeting that will conclude next week. Nevertheless, there was two-way interest in 10-year in a tight range around 0.595%. 2s/10s swaps flattened out a tad to just below 46.5bos due to some upward price action in 2-year amid a stronger yen.


Swap rates at the superlong-end were largely about a basis point lower. However, there was some pre-auction paying in 20-year in earlier trading when it went through up to about 0.75bp higher of 0.9925%. 10s/20s swaps steepened up by half a basis point to 39.5bps.