JPY Swaps: Light long-end flow ahead of BOJ; Long 10y spread idea

Trading in JPY swaps has been cautious ahead of the BOJ MPM with only light flow at the long- to superlong-end. BNPP recommended long 10y spread.

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  • Long 10y swap spread - BNPP

  • Light long-end flow ahead of BOJ

  • New issues


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Long 10y swap spread - BNPP

JGB future was firmer today with stronger uptrend in the afternoon session. Players reckoned the move has been backed by the market pricing out any chance of a hawkish stance from the BOJ. Indeed, Deutsche Bank said the BOJ should get rid of YCC, while ANZ said there would be little incentive for the central bank to change policy this week.


BNP Paribas, on the other hand, identified some opportunities. In a strategy piece released on Friday it noticed that the market would look to expect the BOJ to communicate its action linked with Outlook Report, whose next one comes out in July. However, the bank recommended to position before the June policy meeting as the market can move quickly. It has initiated long 10-year swap spread it prefers short swap over short JGB cash


“Swap 10y seems to be gradually pricing in YCC tweak by cheapening the 5s10s20s curve, as JPY has started to weaken. We think this is why 10-year swap spread is not compellingly cheap, though cheap enough to establish a trade. We expect the trend of 10-year IRS cheapening to continue in favour for our trade,” it said in the piece.


JGB future was up by 21-ticks at 148.3 in mid-afternoon Tokyo trading, and the yield on the benchmark 10-year JGB was down 0.5bp at 0.418%.



Light long-end flow ahead of BOJ

Trading in swaps has not been busy ahead of the US CPI tonight and as players were mostly on the sidelines before the BOJ MPM. A dealer reported light flow from the 10-year point in the morning when 10-year went through around 2bps higher of 0.615% and 20-year around a basis point lower of 0.9675%.


10-year spread tightened up by a basis point to 16bps, and 10s/20s swaps were marginally flatter at 38bps.



New issues

  • Japan Airlines issued JPY20bn in 1.2%, June 17, 2033 bonds.


  • JERA Co Inc raised JPY30bn via selling 0.51% June 23, 2028 bonds at JGBs + 43bps. Among them JPY20bn was retail bonds.


  • JHF issued JPY20bn in 0.797%, June 25, 2038 bonds.