JPY Swaps: Early SL offers; 5-10y bid on renewed inflation worries

Oil refinery
News about crude oil output cuts has triggered renewed worries over inflation. 5-10y JPY swaps saw light paying.

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  • JGB future slumps on renewed worries over inflation

  • 20y bid after earlier offers; 5-10y payers


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JGB future slumps on renewed worries over inflation

JGB future was down by more than half a tick intraday, despite weaker-than-expected Tankan survey results.


Data released earlier today showed that the business sentiment in Japan was lower than the market had predicted. The headline index for big manufacturers' sentiment was +1 versus +7 in December, compared with economists' median estimate of +3. The service-sector mood, by contrast, recovered amid easing border controls. Tankan data would be among those key data the BOJ will scrutinise in producing fresh quarterly growth and inflation estimates at its next meeting at the end of this month, or the first one to be chaired by incoming Governor Kazuo Ueda.


The selloff in JPY rates has been driven by worries over energy-driven inflationary pressure after OPEC unexpectedly announced crude oil output cuts over the weekend.


In late-afternoon domestic trading JGB bond future was down 48-ticks at 147.64, and the yield on the benchmark 10-year JGB was up 3.5bps at 0.36%.



20y bid after earlier offers; 5-10y payers

JPY swap trading has not been overly busy today. Dealers said players were cautious ahead of the RBA tomorrow, and the monthly US jobs data later this week. Both would impact how other central banks would make their decision in the next few months.


The source reported more noticeable activities around 10-year where it was paid up 0.75bp higher of 0.6275% around mid-day.


10s/20s swaps steepened up by 1.75bps to 38.75bps, although 20-year was briefly offered down 0.5bp to 0.9925% in early morning domestic trading. It was then paid up 2bps higher in the afternoon session.


5-year traded in several clips at up to a basis point higher. It was last traded 0.75bp higher of 0.295%.