JPY Swaps: Strong 10y offers as Kuroda stays dovish; JGB future spikes

BOJ Governor 2
JGB future rose by more than a point on dovish Kuroda in his last MPM. Strong 10y offers flattened 2s/10s and steepened 10s/20s.

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  • JGB future surges by more than a point after BOJ

  • 10y leads strong swap offers; 2s/10s flatter and 10s/20s steeper

  • New issues


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JGB future surges by more than a point after BOJ

As had been widely expected, the team led by Kuroda voted unanimously to keep the key pillars of the ultra-loose monetary policy. The key points of the policy are as follows:


  • The overnight interest rate is unchanged at -0.1%.

  • The YCC band is unchanged at +/-50bps around the target 10-year JGB yield at 0%.

  • The BOJ will keep buying 10-year JGBs at fixed rates every business day, in an unlimited amount.


While leaving the economic assessment of the country unchanged, the central bank has changed its tone on its assessment of exports and productions, and said the economy in Japan has picked up.


Elsewhere the Upper House also approved the appointment of hawkish Ueda as the next BOJ Governor, leaving him to engineer an exit from the country’s negative interest rates environment and meet the elusive inflation target.


JGB future was firmer in the morning, partly due to the demand for safe-haven following the liquidation of Silvergate Capital Corp, and as players prepared for another BOJ pause. The conclusion of the meeting saw a sudden surge in the demand, and the lead bond future spiked by 138-ticks intraday before closing the day 109-ticks higher of 146.15. The yield on the benchmark 10-year JGB



10y leads strong swap offers; 2s/10s flatter and 10s/20s steeper

The YCC decision has prompted massive receiving interest in 10-year swaps, although it had already been offered down 6.5bps at 0.8% prior to the meeting. It traded down to 0.775% after lunch break, flattening 2s/10s by 6.75bps to 62.5bps, or the flattest since late-January.


The sharp rally in JGB future also supported interests to long 7-year swaps. A dealer reported trades at 8.25bps lower of 0.565% near market close, tightening 2s/7s by 5bps to 41.75bps.


The JPY also weakened, with USD/JPY jumping to near 137 soon after the meeting. This has failed to trigger paying at the superlong-end of the curve. Indeed, 20-year was offered down more than 9bps intraday before last seen changing hands 7.25bps lower of 1.18375%.


The outperformance in 10-year saw 10s/20s swaps steepening by 2bps to 40.25bps.



New issues

  • Kajima Corp sold JPY10bn in 0.554% March 16, 2028 bonds at JGBs + 32bps.