JPY Swaps: 10y well bid after weak JGB auction; 10s/20s steeper

Auction hammer
Weak demand at today's 10y JGB auction has triggered paying in 10-year swaps. SL has steepened 10s/20s swaps.

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  • 10y yield hits highest level since early March after weak sale

  • 10y well bid; 10s/20s steeper


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10y yield hits highest level since early March after weak sale

JGB future was firmer at the open, but slumped after lunch break after a weak JGB sale.


Earlier today, the MOF sold JPY2.69965trn worth of its JPY2.7trn 10-year 0.5% JGBs (Number 370) at tender. The auction drew bids worth 3.77 times, down sharply from 7.55 times last month. Average yield was 0.456%. The tail widened from 0.00 to 0.11.


The lead bond future was down by 28-ticks intraday before closing the day 23-ticks lower at 147.48. The yield on the benchmark 10-year JGB was 3bps higher at 0.4%.



10y well bid; 10s/20s steeper

News about the RBA pausing this month may have given the BOJ buffer on extended period of an ultra-loose monetary policy. However, the effect of weak demand at today’s JGB sale has had stronger impact on the market. 10-year swaps therefore saw busy activities and were paid up 4.75bps of 0.6825% after lunch break before last seen changing hands around 2bps higher.


The belly has been bid too. 5-year, for example, traded up to near 0.34% at mid-day, up from previous close of 0.295%.


At the superlong-end, 20-year traded mostly between 1.055% and 1.056%, compared to Monday’s close of 1.025%. 10s/20s swaps steepened up by a basis point to 39.75bps.