JPY Swaps: Light long-end flow ahead of GDP; KKR multi-tranche yen bond deal

Japanese Gate
There has been some light flow from the 10-year point of the JPY swap curve as players were cautious ahead of the domestic GDP data.

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  • JGB future erases losses after China data

  • Light long-end flow ahead of domestic GDP

  • New issues – KKR multi-tranche yen bond deal


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JGB future erases losses after China data

JGB future was weaker in the morning session, tracking similar move in the USD rates market in overnight trading when players sold off safe-haven assets ahead of the US debt-ceiling talk later today. The lead bond future then erased all the losses after lunch break after a disappointing set of data from China.


Earlier today, official data from China showed that industrial production was up 5.6% year-on-year in April, up from 3.9% in the previous month but much lower than economists’ forecast of 10.9%. Retail sales in the same month was up 18.4%, up from 10.6% in March but again below consensus of 21.9% worth of growth.


In mid-afternoon Tokyo trading JGB future was up 6-tickst at 148.76, after dipping to 148.62 intraday. The yield on the benchmark 10-year JGB was little changed at 0.4%.



Light long-end flow ahead of domestic GDP

Swappers have been relatively less aggressive, as they have been mindful ahead of the domestic GDP data which will be released tomorrow. A player said it will be a key indicator of the new BOJ Governor Ueda’s next policy move after keeping policy unchanged in the last BOJ MPM. Currently, the market forecasts 1Q GDP annualised growth to be 0.8% quarter-on-quarter, up from 0.1% in the previous quarter. An upside surprise to the forecast will trigger paying at the front-end as market participants would then scrambling to price in some policy tweak in the next MPM.


Trading in swaps has been mostly at the long- to superlong-end. The source reported light receiving in 10-year at a tad below previous close of 0.57% in early morning domestic trading before being marked 1.5bps lower at time of writing. 20-year traded in several clips between 0.9575% and 0.9675% on the day, compared to yesterday’s close of 0.965%.


10s/20s swaps steepend up by 0.75bp to 40.25bps.



New issues – KKR multi-tranche yen bond deal

  • JEHDR issued JPY10bn in 0.815%, May 31, 2038 bonds.


  • US-based Kohlberg Kravis Roberts & Co has launched a multi-tranche JPY-denominated 144R/Reg S deal with the following price guidance over mid-swaps:


    • 5-year at +115-120bps..

    • 7-year at +120-125bps.

    • 10-year at +135-140bps.

    • 12-year at +145-150bps.

    • 15-year at +150-155bps.

    • 20-year at +160-165bps.

    • 30-year at +180-175bps.


  • Osaka Prefecture sold JPY10bn in 0.188%, May 30, 2028 bonds.


  • Starts Proceed Investment Corp raised JPY1.5bn via selling 0.8% May 22, 2028 bonds.