JPY Swaps: Strong 7-10y offers after CS; 20y given as yen jumps

Chart up arrow Oct 2022
The Credit Suisse incident has backed strong receiving in 7-10y JPY swaps, while the subsequent yen's strength has prompted 20y offers.

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  • Bond future spikes by more than a point despite good trade data

  • Strong 7-10y offers; 20y given as yen jumps

  • New issues


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Bond future spikes by more than a point despite good trade data

JGB future spiked by 1.16 points soon after market open despite stronger-than-expected trade data but trimmed gains in the afternoon session following a weak 20-year sale.


Earlier gains were driven by worries over the situation of Credit Suisse, whose stock price slumped by as much as 30% on the previous day as it became caught up in a crisis of confidence after the collapse of Silicon Valley Bank last week and as its largest shareholder Saudi National Bank said it would not provide further support because of regulatory constraints. Investors’ confidence has been low even though the bank has now secured USD54bn wroth of loan from the Swiss National Bank. In the US, players are now pricing a slightly better-than-even chance that policymakers will leave their benchmark lending rate in its current 4.5%-4.75% range at their upcoming meeting on March 21-22, compared to 25-50bps of hike that the market had predicted earlier on. These have triggered a global rally in the rates market.


Official data released earlier today showed that the trade deficit in February was tighter than the market had expected. It was JPY897bn, down from JPY3.50trn in January and narrower than economists’ forecast of 1.15trn. The move was driven by a much weaker than expected imports although exports growth was slightly below expectations.


Earlier today, the MOF sold JPY1.1999trn worth of its JPY1.2trn 20-year 1.4% JGBs (Number 183R) at tender. The auction drew bids worth 2.85 times, down from 3.05 times last month. Average yield was 1.079%. The tail widened markedly from 0.13 last month to 0.67.


JGB future finally closed the day 72-ticks higher at 148.44, and the yield on the benchmark 10-year JGB was 4bps lower at 0.285%.



Strong 7-10y offers; 20y given as yen jumps

The 7-10y area of the swap curve saw strong receiving amid the sharp rally in bond future. 7-year traded down to 10bps lower in the morning session before last traded 4bps lower of 0.405%. Players also scrambled to receive 10-year, which saw trades at 13.5bps lower of 0.5% intraday although the majority of the flow has been between 0.555% and 0.56%.


The strength in the yen also prompted worries over further selloff in the Nikkei, driving offered-side flow at the superlong-end of the curve.


USD/JPY made a downside break below 132.5 in overnight trading, compared to those traded above 135 soon after Tokyo close on Wednesday.


20-year traded down to almost 9bps lower of 0.9625% in early morning domestic trading before traded between 1.01% and 1.02% in the afternoon session.


10s/20s swaps steepened up by 3bps before being marked 1.25bps wider at 44.25bps at time of writing.



New issues

  • JFM raised JPY8.5bn via selling the following bonds:


    • JPY3.5bn, 1.196%, March 24, 2043 via Mizuho.

    • JPY5bn, 0.281%, May 30, 2028 via MUMSS.


  • Kochi Prefecture priced JPY5bn in 0.215%, March 28, 2028 bonds at JGBs + 10bps.