JPY Swaps: 2s/5s hits new high; SL payers

• JGB future rebounds

• Good 5-10y offers after lunch break

• 2s/5s hits new high; SL payers

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JGB future rebounds

After two consecutive days of sharp selloff, JGB future began to recover since overnight trading when it traded above 146 again. In domestic trading today it spiked briefly to 146.64 after lunch break before being marked 60-ticks higher at 146.36 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was down by 7.5bps to 0.398%, after hitting its fresh high of 0.473% on Wednesday.

Good 5-10y offers after lunch break

Flow wise, 10-year swaps have mostly been offered amid the sharp rally in the underlying JGBs. A dealer reported receiving at down to 2bps lower of 0.7275% in the afternoon session, although there was still sporadic paying at about 2bps higher before lunch break.

5-year has been busily traded, backed by slightly better paying in the morning, but good receiving in the afternoon. After reaching its fresh high of above 0.5% on the previous day, it was paid up further to 0.5175% intraday before being offered down to 3.25bps lower of 0.4675% in the afternoon session.

2s/5s hits new high; SL payers

2s/5s swaps were however a tad steeper at its fresh high of just above 22.75bps despite receiving in 2-year at about 1.5bps lower of 0.255%, as players anticipated further upside led by more paying in the 5- to 10-year area of the curve in the medium term to reflect the shift in BOJ’s stance.

Elsewhere, the superlong-end saw better paying again with 20-year traded up to about 2.5bps higher. 10s/20s swaps steepened up by 2.75bps to 36.75bps as a result.