JPY Swaps: Light 10y offers ahead of domestic data; Belly flow

• JGB future trims gains after lunch break

• 2-way belly flow; Light 10y offers

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JGB future trims gains after lunch break

JGB future was firmer in the morning session, tracking the gains in the USD rates market on Friday as players priced in a higher chance of a recession in the US. The lead bond future was up by 16-ticks in the morning before trimming gains after lunch break to mark only 2-ticks higher at 148.72 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was a basis point higher at 0.29%.

Traders have turned less aggressive ahead of the Tokyo CPI, jobs and retail sales data which will be released this Friday. A market participant said players prefer to sit on the sidelines following the volatility in the past two weeks, and the upcoming data will shed some light on the next BOJ policy move although the market is widely confident that the central bank would stand pat given the current situation.

2-way belly flow; Light 10y offers

The source reported relatively busier flow around the belly of the curve, backed by 2-way interest there. 5-year, for example, traded a tad lower of 0.235% in earlier trading, but there was also paying at 0.25%. 7-year, on the other hand, traded briefly at 0.75bp lower of 0.3775% in the morning session. At the longer-end, 10-year was paid up a basis point higher of 0.585%.

The swap curve steepened up a tad from the 10-year point amid some upward pressure on superlong swap rates due to the rally in the Nikkei. 10s/20s and 10s/30s swaps were both 0.25bp steeper at 44.75bps and 52.75bps respectively.