JPY Swaps: 7-10y well offered; Yen's strength drives front-end flow

Up arrow chart 8 apr 2022
7-10y JPY swaps have been well offered after the interest rate decisions by the ECB and the BOE. The yen's strength has triggered front-end flow.

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  • JPY rates spike after ECB and BOE

  • Good 7-10y offers; Yen’s strength drives 1y flow

  • New issues


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JPY rates spike after ECB and BOE

The JPY rates market has followed other key markets higher, as the latest interest decisions by the ECB and the BOE have prompted renewed expectation about future monetary policies in those regions. Players are now pricing out possibilities of aggressive interest rate hikes as they believe that the cycles have reached their peak with smaller interest rate raises in the near future before finally settling in. “The decisions from the west suggest that the BOJ can sit still for an extended period of time,” a trader explained of the excessive reaction in the JPY rates market today.


JGB future spiked by close to half a point soon after lunch break before trimming gains to mark 38-ticks higher at 147.17 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was down a basis point to 0.483%.



Good 7-10y offers; Yen’s strength drives 1y flow

10-year JPY swaps have shown the clearest reaction to the sharp rally in the underlying cash bond market. A dealer reported good amount of receiving in 10-year since market open and 10-year has traded between 1-2bps lower on the day. It was last seen changing hands close to 1.5bps lower of 0.81%, flattening 2s/10s by 0.25bp to 64.75bps.


Slightly down the curve, 7-year traded up to 1.5bps lower of 0.5925% before being marked just a tad higher than 0.6% at time of writing. 7s/10s swaps therefore flattened out by half a basis point at 21bps intraday.


The yen also strengthened against the USD in overnight trading when the pair traded below 128.1. This has prompted some good-sized receiving in 1-year at half a basis point lower of 0.07%, although there was also trades down to below such level in the morning session.



New issues

  • Aichi Prefecture sold JPY14bn in 0.740%, April 14, 2033 bonds. Priced at JGBs + 25bps.


  • Chiba Prefecture priced JPY20bn in 0.309%, January 25, 2028 bonds at JGBs + 13.5bps.


  • Hiroshima Prefecture issued JPY8bn in 0.309%, January 17, 2028 bonds at JGBs + 13.5bps.


  • Japan Overseas Infrastructure Investment Corp for Transport & Urban Development sold JPY5bn in 0.695%, January 15, 2033 bonds.


  • JHF raised JPY25bn via selling 0.203%, December 16, 2028 bonds.


  • Saitama Prefecture priced JPY20bn in 0.745%, January 21, 2033 bonds at JGBs + 25bps.


  • Sapporo City issued JPY10bn in 0.294%, January 20, 2027 bonds. Priced at JGBs + 12bps.