JPY Swaps: Light long-end offers flatten curve; More support for a BOJ pause

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The rally in the USD and AUD rates markets has furthersupported views that the BOJ would stay where it was, backing some receiving from the 10y point.

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  • JGB future rallies hard after First Republic Bank and Australia’s CPI

  • Light long-end offers flatten curve

  • New issues - SMBC Aviation Capital launches 5y 144A/Reg S


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JGB future rallies hard after First Republic Bank and Australia’s CPI

The sharp rally in the USD rates market on Tuesday and Australia missing inflation forecast have prompted strong demand for JPY rates.


In overnight trading, US treasury yields plummeted by up to 15bps across the curve after disappointing earnings report from First Republic Bank and following news from Bloomberg that it has been exploring divesting up to USD100bn worth of long-dated mortgages and securities as part of the rescue plan.


Official data released earlier today in Australia showed that inflation in March was 6.3%, down from 6.8% in February and below economists’ expectation of 6.5%. The faster-than-expected cooling of inflation triggered thoughts that the central bank in Australia would pause again when it meets next Tuesday. This offered further comfort to the BOJ if the board keeps its ultra-loose monetary policy this Friday after the MPM.


JGB future was up by 32-ticks soon after market open. It trimmed gains between mid-morning and early-afternoon domestic trading before picking up such momentum again. At time of writing the lead bond future was up 33-ticks at 148.07, and the yield on the benchmark 10-year JGB was down 1.5bps at 0.455%.



Light long-end offers flatten curve

Swap trading has not been busy ahead of the BOJ MPM. A market participant reported more price action than actual flow. “Most traders have prepared for the BOJ to stay where it was, and the news from the US and Australia was just a confirmation that the BOJ wouldn’t be an odd one out,” he explained.


10-year traded briefly and in small size in the morning at down to 2.5bps lower of 0.605%. 15-year traded down to 2.25bps lower of 0.845% at the open before last seen changing hands at 0.85%. 20-year, on the other hand, traded 2.75bps lower of 1.01% around mid-day.


2s/10s and 10s/20s swaps flattened out by 2.5bps and 0.5bp to 51.75bps and 40.25bps respectively.



New issues - SMBC Aviation Capital launches 5y 144A/Reg S

  • Mitsubishi Estate Co Ltd raised JPY60bn via selling bonds in two equal tranches as follows:


    • 0.43%, May 2, 2028 at JGBs + 28bps.

    • 0.9%, May 2, 2033.


  • Nippon Paper Industries issued JPY30bn in 0.39%, May 1, 2026 bonds.


  • SMBC Aviation Capital has launched a 5-year USD 144A/Reg S bond offer with price guidance at around +240bps area. Leads are Citigroup, CA, JPM, RBC and SMBC Nikko.