JPY Swaps: 20y bid deepens after weak auction; 2s/10s steeper

Steep ice climb 25 Mar 2021
Weak 20y JGB sale prompted further paying in 20y swaps in the afternoon, steepening 10s/20s. 10y bid steepened 2s/10s too.

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  • Selloff deepens after weak 20y sale

  • More 20y bid post-auction; 2s/10s steeper

  • New issues


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Selloff deepens after weak 20y sale

JGB future a tad weaker in the morning, contrasting the gains in the USD rates market in overnight trading. Players have been focusing on the currency move of late, as JPY weakened further in overnight trading with USD/JPY making an upside break above 143.7 in US trading. The country’s Finance Minister Shunichi Suzuki said earlier today that the country would take appropriate actions to cope with excessive volatility in the currency market. Players have therefore been cautious as any intervention may trigger some wild moves in both the rates and equity markets.


The selloff in JPY rates deepened after lunch break, following weak demand at the auction.


Earlier today, the MOF sold JPY899.3bn worth of its JPY900bn 20-year 1.1% JGBs (Number 184R) at tender. The auction drew bids worth 3.03 times, down sharply from 3.69 times last month. Average yield was 0.948%. The tail widened from 0.04 to 0.22.



More 20y bid post-auction; 2s/10s steeper

Swap trading has been mostly from the 10-year point of the curve.


A dealer reported paying in 10-year at up to 0.5475% at the open before such interest eased in the afternoon when it traded mostly between 0.525% and 0.535%. These compared to previous close of 0.515%.


Another player noticed pre-auction paying in 20-year at up to a basis point higher of 0.9125% before the auction. Paying turned more aggressive after the sale and 20-year then traded in a tight range around 0.925% after lunch break.  


The underperformance in 20-year saw 10s/20s swaps steepening by 0.5bp to 39.25bps. The short-end has been outperforming the longer-end on the selloff. 2s/10s swaps therefore steepened up by a basis point to 48.75bps.



New issues

  • Mitsubishi Corp has mandated Citigroup, MS and JP Morgan for a possible 144A/Reg S 5-year benchmark USD-denominated bond offer with price guidance around +130bps area.