JPY Swaps: 10y turns offered after news on yield policy; 2s/10s hits new high

Steep curve 9 Nov 2020
10-year JPY swaps turned offered after news about BOJ not rushing to adjust its yield policy. 2s/10s swaps steepened up to its fresh high.

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  • JGB future spikes as BOJ whispers yield policy

  • 10y turns offered after BOJ; 2s/10s hits fresh high

  • New issues


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JGB future spikes as BOJ whispers yield policy

JGB future headed for its third consecutive of gains, despite losses in front-end US treasuries in overnight trading.

Data released in the US on Thursday showed a much stronger than expected jobs market there. This has triggered renewed worries that the US Fed would continue to raise rate rather aggressively. Front-end USD rates saw a sharp selloff with 2-year yields down by almost 10bps.


The lead bond future was down briefly in the morning session before establishing a clear and firm upward trend after lunch break. It shot up near market close after a report from Bloomberg which said BOJ saw no need to rush further adjustment in major yields. JGB future spiked to 146.04 before finally settling 22-ticks higher at 145.89. The yield on the benchmark 10-year JGB was about a basis point lower at 0.414%.



10y turns offered after BOJ; 2s/10s hits fresh high

The sharp selloff in short-dated US treasuries saw paying in 2-year swaps at up to 2bps higher of 0.25% soon after market open. 2-year then turned slightly better offered and traded down to 0.2075% intraday.


10-year was better bid in the morning session when it traded 0.5-0.75bp higher. The story about the BOJ yield policy then triggered better receiving in 10-year, and it traded down to 1.75bps lower of 0.84% before closing around a basis point lower.


2s/10s swaps steepened up further by 2.75bps and marked its fresh high of 65.5bps. A dealer said the slope would likely trend downward from now on given the latest news about the BOJ yield policy, and added that “anything above 65bps is already a sign for a corrective flattening move anyway”.



New issues

  • Hamamatsu City priced JPY10bn of 0.8%, January 25, 2033 bonds at JGBs + 30bps.


  • Hiroshima Prefecture sold JPY10bn in 0.8% January 25, 2033 bonds at JGBs + 30bps.


  • Kyoto City issued JPY10bn in 0.8%, January 24, 2033 bonds. Priced at 30bps over JGBs.