JPY Swaps: 10-20y sold off as BOJ trims JGB purchase; Curve steeper

Crisis chart very red 26 May 2022
The 10-20y area of the JPY swap curve has been well bid as the BOJ cut the amount of JGBs it purchased from the market. The curve steepened up.

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  • JGB future slumps as BOJ trims JGB buyback

  • 10-20y sold off; Curve steeper

  • New issues


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JGB future slumps as BOJ trims JGB buyback

JGB future saw a dramatic selloff today. After rallying by up to more than 2 points on the previous day, it was sold off by more than 50-ticks in the morning before closing the day 38-ticks lower at 147.72. The yield on the benchmark 10-year JGB was up by 10.5bps to 0.323%.


The selloff in JPY rates has been in part driven by similar move in the USD rates market on Tuesday.


USD rates were sold off in overnight trading as traders believed the worst of the turmoil in the banking industry that was triggered by the SVB incident has passed. This dampened demand for rates. The still elevated CPI data, though matching economists’ expectations, also prompted selling of US treasuries.


The slump in JPY rates in domestic trading, however, has been supported more due to the BOJ trimming its purchase of superlong JGBs from the expected JPY100bn to JPY50bn at today’s open market operation. 20-year JGB yield spiked by 18bps as a result.



10-20y sold off; Curve steeper

20-year swaps were sold off too. A dealer reported paying there at up to 12bps higher of 1.03% in the afternoon session. Selling interest has also extended downward to 10-year where it traded up to 0.6175% intraday, although the majority of the flow has been between 0.58% and 0.59% on the day. These compared to previous close of 0.53%.


10-year spreads tightened up by 3.25bps to 28bps, as cash bond players have been  more aggressive selling off their holdings. 20-year spread, which dis-inverted briefly on the previous day, inverted again and it was last seen 5bps narrower at -4.5bps.


The mid-sector has been well bid with 5- and 7-year traded around 4-4.5bps higher.


At the short-end, 2-year traded in a tight range around 0.0975% in the morning but was last seen traded 4bps higher of 0.115%.


2s/10s and 10s/20s swaps steepened up by 3.75bps and 4.5bps to 49.25bps and 43.25bps respectively.



New issues

  • JFM issued via Tokai JPY4.5bn in 1.095% March 23, 2043 bonds.