JPY Swaps: Yen move backs SL bid; Curve steeper; GDP above expectations

Steep curve 9 Nov 2020
Domestic GDP data and the hike by Bank of Canada have triggered a selloff in JPY rates. 10y outperformed and the curve was steeper from 10y.

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  • JGB future weaker after strong GDP and Bank of Canada

  • Weak yen backs SL bid; Long-end steeper

  • New issues


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JGB future weaker after strong GDP and Bank of Canada

JGB future opened weaker, after stronger-than-expected domestic data. It has followed other rates market lower after the 25bp interest rate hike by the Bank of Canada, as said such move has triggered concerns over longer and more aggressive tightening in the US and thus selling of rates.


Official data released earlier today showed that GDP in Japan was up 0.7% quarter-on-quarter, up from 0.4% in the previous period and above economists’ forecast of 0.5%.


JGB future was down by 22-ticks soon after market open, and trimmed losses in the later part of the morning session. The selloff continued after lunch break, and the lead bond future was down 18-ticks at 148.66 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was up close to a basis point at 0.429%.



Weak yen backs SL bid; Long-end steeper

Swap dealers were more concerned about the renewed weakness in the yen following further selloff in USD rates. The pair re-climbed to levels above 140 in domestic trading and backed some paying at the superlong-end of the curve.


20-year, for example, traded up to near 0.99% in early morning domestic trading, and then in a tight range around 0.98% afterwards. 30-year went through 1.055% after lunch break, after traded near 1.06% in earlier trading.


10-year has been outperforming the selloff at the superlong-end. A player said Ueda’s reiteration about an ultra-lose monetary policy and the continuous improvement in JGB liquidity has helped support demand for 10-year. 10-year therefore traded flat to marginally lower most of the day, although it went through briefly at 0.75bp loser at 0.59% before lunch break.


10s/20s and 10s/30s swaps steepened up by 0.25bps and 0.5bp to 37.75bps and 45.25bps respectively.



New issues

  • Hyogo Prefecture raised JPY26bn via selling the following bonds:


    • JPY15bn, 0.661%, June 20, 2033 at JGBs + 23bps.

    • JPY11bn, 0.21%, June 20, 2028 at JGBs + 11bps.


  • JFM issued the following bonds:


    • JPY25bn, 1.105%, June 26, 2043 at JGBs + 8bps.

    • JPY35bn, 0.681%, June 28, 2033 at JGBs + 25bps.

    • JPY15bn, 0.23%, June 28, 2028 at JGBs + 13bps.


  • Sumitomo Mitsui Finance sold JPY55bn worth of bonds as follows:


    • JPY20bn, 0.44%, June 15, 2028 at JGBs + 34bps.

    • JPY20bn, 0.26%, June 15, 2026.

    • JPY15bn, 0.85%, June 15, 2033.