JPY Swaps: Pre-auction 10y bid fades after strong sale

• JGB future trims losses after strong 10y sale

• Pre-auction 10y bid fades after strong demand

• New issues

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JGB future trims losses after strong 10y sale

Losses in the USD rates market has prompted similar selloff in the JPY rates market, with JGB future down by more than 20-ticks in the morning session.

On Wednesday, 2-year US treasury yield rose to its highest level since 2007, as the stronger-than-expected PMI data from China and an overall strong set of ISM data from the US added to worries about persistent inflation in the US. 10-year yield also made an upside break above the key 4% level.

The lead bond future then trimmed losses after lunch break and was up by a few ticks intraday following strong demand at the 10-year sale.

Earlier today, the MOF sold JPY2.2trn worth of its JPY2.2trn 10-year 0.5% JGBs (Number 369Ｒ) at tender. The auction drew bids worth 7.55 times, up massively from 4.61 times last month. Average yield was 0.5% and the tail was tightened from 0.1 last month to 0.00.

In mid-afternoon Tokyo trading JGB future was down 4-ticks at 146.65, and the yield on the benchmark 10-year JGB was marginally higher at 0.502%.

Pre-auction 10y bid fades after strong demand

In swaps there was pre-auction paying in 10-year at up to near 0.86% in the morning session. 10-year then traded only 1.25bps higher of 0.82% in the afternoon after the auction.

The sharp rise in 2-year US treasury yield has triggered demand for the USD. Expectations about a FX-driven rally in the Nikkei then prompted paying at the superlong-end of the curve. 20-year, for example, traded up to near 1.21% in the morning session although the majority of the flows has been around 1.195% on the day. These compared to previous close of 1.17%. 30-year traded in a tight range around 2.5bps higher of 1.215% before being marked 1.22% at time of writing. 10s/20s and 10s/30s steepened up by 1.5bps to 37.75bps and 39.75bps respectively.

The currency move also supported paying in 2-year at up to 1.5bp higher of 0.2% after mid-day. 2s/10 swaps were 1.25bps steeper at 64.5bps.

New issues

• Asahi Group raised JPY100bn via selling the following bonds:

   

  • JPY50bn, 0.28%, March 6, 2026.

  • JPY25bn, 0.544%, March 8, 2028 at JGBs + 32bps.

  • JPY25bn, 0.87%, March 8, 2030 at JGBs + 44bps.

   

• JA Mitsui Leasing Ltd sold JPY30bn worth of bonds as follows:

   

  • JPY10bn, 0.705%, March 9, 2028 at 48bps over JGBs.

  • JPY20bn, 0.3%, March 9, 2026.

   

• Orix Corp issued JPY40bn worth of bonds as follows:

   

  • JPY10bn, 0.654%, March 8, 2028 at JGBs + 43bps.

  • JPY20bn, 0.28%, March 6, 2026.

  • JPY10bn, 0.654%, March 16, 2028.

   

• Sumitomo Corp has launched a March 9, 2028 Reg S USD bond offer with price talk around +160bps area. Leads are BofA, Citigroup and GS.

   

• Suntory Holdings priced JPY19.6bn worth of March 22, 2083 bonds at 95bps over JGBs. The deal pays 1.174% till the quarterly call at par in March 2028, then 95bps over JGBs. The spread increases to 120bps from March 2033, and 195bps from March 2048.