JPY Swaps: Curve flatter to 10y as 10y given ahead of domestic CPI

Kyoto bamboo forest
JPY swappers have been cautious ahead of domestic CPI. 10y saw light receiving which flattened the curve to 10y before steepening beyond that point.

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Light 10y offers ahead of US Powell and domestic CPI

JGB future opened firmer, tracking the move in the USD rates market in overnight trading. The rally in the domestic rates market has also been backed by BOJ board member Adachi who said earlier today that it would be too premature for the central bank to adjust its ultra-loose monetary policy in the near term due to uncertainties. Currently, market players expect the BOJ to at least revise up its quarterly inflation forecast, while some are prepared for a YCC tweak when the board next meets in July.


In mid-afternoon Tokyo trading JGB future was up 12-ticks at 148.65, and the yield on the benchmark 10-year JGB was down half a basis point at 0.379%.


Trading in swaps has been very subdued ahead of the testimony by US Fed Chair Powell later today, and before the release of domestic inflation data on Friday. Economists widely expect inflation in May to ease from 3.5% to 3.2%, and an upside surprise may trigger a selloff in JPY rates as it would prompt more players to price in a July monetary move.


10-year went through briefly in a tight range around 0.545% in the morning session, and trading interest then faded after lunch break.


The swap curve flattened out to 10-year before steepening up beyond that point. 2s/10s swaps were down 0.5bp to 49.75bps while 10s/20s swaps were up by 0.75bp to 38.25bps.



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