JPY Swaps: 10-20y bid; Long-end flatter ahead of data

• JGB future falls further after 5y auction

• Light 10-20y bid; 10s/20s flatter

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JGB future falls further after 5y auction

Stronger-than-expected domestic data, together with the selloff in USD rates market on Friday, has backed a selloff in the Japanese rates market today.

Earlier today, official data released showed that PPI in April was up 5.8% year-on-year in April, down from 7.4% in March but above economists’ expectation of 5.6%. It was up 0.2% on a monthly basis, while the market had expected to show zero growth.

JGB future fell further in the afternoon session after slightly weaker-than-expected demand at the 5-year JGB auction.

The MOF sold JPY2.499trn worth of its JPY2.5trn 5-year 0.1% JGBs (Number 158) at tender today. The auction drew bids worth 3.7 times, down from 3.95 times last month. Average yield was 0.116% and the tail widened from 0.01 to 0.02.

Light 10-20y bid; 10s/20s flatter

Traders said players were not enthusiastic entering new positions ahead of the release of key economic data later this week, including 1Q GDP, and inflation and trade data for April. A player said consensus is to see further growth in those area which would be alarming for the country as the central bank seems to bias towards sticking to its ultra-loose monetary policy at least for the near-term.

Flow wise, there was some light and sporadic paying in the 10-20y area throughout the day. 10-year traded up to around 0.59%, up from previous close of 0.545%. 20-year, on the other hand, traded 2-2.5bps higher at between 0.96%-0.965%.

10s/20s swaps flattened out by 0.25bp to 39.25bps.