JPY Swaps: Flatter from 10y after 30y auction

Deflated red balloon 21 Jun 2021
Good 30y auction and the US CPI data have backed receiving interest from the 10y point of the JPY swap curve. The curve flattened out from 10y.

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  • JGB future rallies more after 30y auction

  • Long-end flatter after auction

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JGB future rallies more after 30y auction

JGB future has followed the USD rates market firmer, after the US CPI data.


Core US inflation in April was 4.9%. The market had expected it to stay unchanged at 5%. Inflation excluding food and energy, on the other hand, matched economists’ forecast of 5.5%, or down from 5.6% in the previous month.


Traders said players have become more confident that the US Fed would pause next month, and that the interest rate there has become closer to the terminal rate.


This has backed relatively stronger appetite for safe-have assets. Buying of JPY rates was boosted in the afternoon session after good amount of demand at the JGB auction.


Earlier today, the MOF sold JPY898.8bn worth of its JPY900bn 30-year 1.4% JGBs (Number 78R) at tender. The auction drew bids worth 3.49 times, down slight from 3.19 times last month. Average yield was 1.252% and the tail was unchanged at 0.10.


In mid-afternoon Tokyo trading the lead bond future was up 14-ticks at 148.72, and the yield on the benchmark 10-year JGB was 1.5bps lower at 0.4%.



Long-end flatter after auction

Trading in swaps has turned slightly busier with most of the flow from the 10-year point. However, the mood remained cautious ahead of the US PPI data tonight. On the domestic front, key domestic data such as GDP, PPI, CPI and trade data will be released next week, keeping many players on the sidelines.


10-year was offered down 0.5-1bp in the morning session. It was further given to 1.75bps lower of 0.56% after lunch break, and following good demand at the 30-year auction. 20- and 30-year swaps, on the other hand was offered down 2.5bps and 3.75bps to 0.94% and 1% respectively.


The swap curve made a downward shift at the shorter-end, but flattened out from the 10-year point. At time of writing, 10s/20s and 10s/30s swaps were 1.25bps flatter at 37.75bps and 44.5bps respectively.