JPY Swaps: BOJ to stay dovish; Barclays' long bias in 5-20y

BOJ building sign
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Barclays has expressed its bias in 5-20y into the June BOJ MPM next week. Long-dated swaps saw light paying due to the currency move.

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  • BOJ to stay dovish

  • Barclays’ long bias in 5-20y

  • New issues

 

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BOJ to stay dovish

JGB future has followed the USD rates market higher, which was in turn triggered by concerns over a recession in the US after the jobs data.

 

In overnight trading, US treasury yields fell as the latest jobless claim data showed that it had spiked to a nearly two-year high. This has triggered renewed worries over a recession given the interest rate environment in the US, and as the US Fed still sounds hawkish.

 

The lead bond future was up by close to 20-ticks near market open before trimming gains to mark 13-ticks lower at 148.75 in mid-afternoon Tokyo trading. The yield on the benchmark 10-year JGB was marginally higher at 0.433%.

 

Elsewhere, BOJ Governor said earlier today that the country will continue monetary easing patiently as there are still some distance and uncertainties to price target. This has almost confirmed that the BOJ would stay dovish when it meets end of next week.

 

 

Barclays’ long bias in 5-20y

Barclays said it saw little risk of the BoJ’s communications turning hawkish at the June MPM. The team noted in a research piece release on Thursday that the yield curve could see an increase in bull-steepening pressure if the BoJ sticks to a behind-the-curve strategy, taking longer than previously expected to launch policy changes. In particular, the bank saw “substantial scope for a correction of 10-year cheapening as forecasts for policy revision are pushed out. In the over-20y sector, a decline in yields could strengthen the possibility of weaker demand from life insurers and reduced buying by the BOJ, tilting the supply-demand balance toward oversupply.” Barclays therefore prefers to stick with its long bias into the MPM, especially in the 5- to 20-year sector.

 

The swap market saw mostly flows in 10-year on the day, backed by better paying there due to the JPY staying stubbornly weak against the USD and the pair still trading confidently above 139 on Friday. A market participant noticed 10-year flows at up to around 0.6275% but was last changing hands at 0.6%. These compared to those traded below 0.6% on Thursday.

 

20-year traded near 1%, compared to previous close of around 0.98%. 30-year, on the other hand, was last traded about 1.25bps higher of 1.07%.

 

 

New issues

  • Ajinomoto Co priced JPY30bn worth of bonds as follows:

     

    • JPY10bn, 0.320%, June 15, 2028 at JGBs + 23bps.

    • JPY20bn, 0.770%, June 15, 2033 at JGBs + 33.9bps.

     

  • GMO Internet Group Inc sold the following bonds:

     

    • JPY10bn, 1.480%, June 15, 2028.

    • JPY2bn, 1.900%, June 14, 2030.

     

  • Hokkaido Prefecture priced JPY10bn in 0.828%, June 25, 2043 bonds at JGBs + 33bps.

     

  • Ibaraki Prefecture issued JPY13bn in 0.681%, June 30, 2033 bonds at JGBs + 25bps.

     

  • Japan Freight Railway raised JPY10bn via selling bonds in two equal tranches as follows:

     

    • 0.761%, June 15, 2033 at JGBs + 33bps.

    • 1.370%, June 15, 2043 at JGBs + 34bps.

     

  • JIC issued JPY25bn worth of bonds as follows:

     

    • JPY10bn, 1.110%, March 20, 2043 at JGBs + 8bps.

    • JPY15bn, 0.681%, March 18, 2033 at JGBs + 25bps.

     

  • Japan Transcity Corp priced JPY8bn in 0.505%, June 15, 2028 bonds at JGBs + 41bps.

     

  • JEHDR sold JPY10bn in 1.040%, June 30, 2043 bonds.

     

  • Kao Corporation priced JPY25bn in 0.345%, June 20, 2028 bonds at JGBs + 25bps.

     

  • Kumamoto Prefecture issued JPY10bn in 0.809%, June 23, 2043 bonds at JGBs + 33bps.

     

  • Osaka Prefectural Housing sold JPY4bn in 0.781%, June 20, 2033 bonds at JGBs + 35bps.

     

  • Resonac Holdings Corp raised JPY45bn via selling the following bonds:

     

    • JPY12.4bn, 1.500%, June 15, 2033.

    • JPY8.6bn, 1.100%, June 14, 2030.

    • JPY9bn, 0.695%, June 15, 2028.

     

  • Sapporo City priced JPY15bn in 1.110%, June 19, 2043 bonds at JGBs + 8bps.

     

  • Sosila Logistics REIT sold JPY3bn in 0.600%, May 31, 2028 bonds.

     

  • Sumitomo Corp issued JPY10bn in 0.840%, June 15, 2033 bonds.

     

  • Toyota Tsusho Corp raised JPY40bn via selling bonds in two equal tranches as follows:

     

    • 0.355%, June 15, 2028.

    • 0.800%, June 15, 2033.

     

  • Urban Renaissance sold JPY25bn worth of bonds as follows:

     

    • JPY10bn, 0.681%, June 20, 2033 at JGBs + 25bps.

    • JPY10bn, 1.120%, June 19, 2043 at JGBs + 9bps.

    • JPY5bn, 0.235%, June 20, 2028 at JGBs + 14bps.

     

  • Welfare & Medical Service Agency priced JPY10bn in 0.681%, June 20, 2033 bonds at JGBs + 25bps.

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