JPY Swaps: 7y bid; Barclays sees earlier dismantling of YCC

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Trading in JPY swaps has been cautious with some paying in 7y swaps. Barclays sees an earlier dismantling of YCC.

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  • Good-sized 7y bid in cautious trades

  • Under-weigh 7-10y as YCC may dismantle earlier – Barclays

  • Japanese deals stand out as market meanders

  • New issues


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Good-sized 7y bid in cautious trades

The JPY rates market has followed the USD rates market lower.


In overnight trading, most of the USD treasury yields were higher after higher-than-expected growth in PPI in January.


JGB future was down by 15-ticks intraday before being marked 11-ticks lower at 146.6 in late-morning domestic trading. The yield on the benchmark 10-year JGB was marginally lower at 0.498%.


Market participants said trading in swaps has been cautious ahead of the final appointment of the BOJ head, as the change may result in some relatively drastic adjustments in the monetary policies.


Nevertheless, the selloff in JGB future drove some good amount of paying in 7-year swaps, which traded mostly in a tight range around a basis point higher of 0.6275% although there were a couple of better-sized trades at 4.5bps higher soon after market open.


10-year went through briefly at 4bps higher of 0.87% before paying interest faded as players returned to a wait-and-see mode.


2s/10s swaps steepened up by 0.5bp to 65.5bps while 2s/7s steepened up by a basis point before currently marked just 0.5bp steeper at 44.25bps.



Under-weigh 7-10y as YCC may dismantle earlier – Barclays

Past remarks by BOJ Governor nominee Kazuo Ueda suggest he may be cautious to rush toward short-term rate hikes although he has a negative view of long-term yield controls. However, according to a recent research piece from Barclays, the team believes the BOJ will eventually move toward dismantling long-term yield controls, especially given the glaring side effects of the current policy. This is despite of earlier comments from Ueda which stated that the central bank needs to stick with monetary easing under current conditions.


With US yields showing a stronger upward trend as recession concerns are pushed out, Barclays sees some upside risks in the fair level of 10y JGB yields. However, the team believes it is still too early to take risk through outright long positions, and so it reiterated to under weigh the 7- to 10-year sector to hedge against an early dismantling of the YCC. On top of that, it also recommended taking long gamma positions to hedge against surges in volatility.



New issues

  • AEON Financial Service issued JPY40bn worth of bonds in two equal tranches as follows:


    • 0.8%, February 24, 2028.

    • 0.59%, February 24, 2026.


  • Daiwa Securities Group raised JPY60bn via selling bonds in two equal tranches as follows:


    • 0.54%, February 24, 2026.

    • 0.794%, February 24, 2028 at JGBs + 59bps.


  • JEHDR priced the following bonds:


    • JPY12.7bn, 1.442, February 27m 2943 at JGBs + 11bps.

    • JPY10bn, 0.3%, February 26, 2027 at JGBs + 21bps.


  • JFM priced a €500m in 5-year 3.375% Green bond at swaps +31bps. Leads are Barclays, BNPP, JPM and Mizuho.


  • Kyushu Electric Power issued JPY13.9bn in 0.41%, February 25, 2026 bonds.


  • Marubeni Corp raised JPY20bn in 0.614%, February 24, 2028 bonds at JGBs + 21bps.


  • Mizuho Bank sold the following bonds:


      AUD500m in February 23, 2026 FRNs that pay AUD 3M BBSW + 86bps.

    • €600m May 20, 2028 and a €750m May 20, 2033 at swaps +105 and 140bps respectively. Leads are Barclays, BNPP, BBVA, Mizuho (B&D) and Natixis.

    • CNY500m, May 17, 2023 zeros.


  • MUFG issued the following bonds:


    • USD1bn, February 22, 2029 paying 5.422% till the single call at par in February 2028, then USTs + 138bps

    • USD500m, February 22, 2031 paying 5.475% till the single call at par in February 2-30, then USTs + 153bps.

    • USD1.25bn, February 22, 2034 paying 5.441% till the single call at par in February 2033, then USTs + 163bps.

    • USD1.65bn, February 20, 2026 paying 5.719% till the single call at par in February 2025, then USTs + 108bps.

    • USD600m, February 20, 2026 paying USD overnight SOFR + 94bps with single call at par in February 2025.


  • Swedbank AB issued via JPM JPY10bn in 1.5%, February 24, 2033 bonds.