JPY Swaps: 2s/10s steeper; BOJ seen revising inflation outlook after CPI

Baloon inflation night 9 Jul 2020
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Inflation in Japan came in stronger than expected, driving a selloff in JPY rates. 10-year saw some paying and 2s/10s steepened up as a result.

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  • BOJ seen revising inflation outlook post-CPI

  • More 10y bid after data; 2s/10s steeper

  • New issues

 

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BOJ seen revising inflation outlook post-CPI

Smaller-than-expected initial jobless claims in the US, the uptrend in oil prices, and faster-than-expected domestic inflation have all contributed to a selloff in the JPY rates market today.

 

Official data released earlier today showed that headline nation inflation was 3.3% in June. Economists had expected it to stay unchanged at 3.2%. Although BOJ Governor Ueda hinted earlier this week that there would not be any tightening of monetary policy or YCC tweak, such data print has reinforced expectations that the central bank might revise upward the inflation outlook of the country. This has supported better selling interest in safe-haven assets, according to a market participant.

 

In mid-afternoon Tokyo trading JGB bond future was down 13-ticks at 147.7, after falling by more than 30-ticks in early-morning domestic trading. The yield on the benchmark 10-year JGB was 1.5bps higher at 0.475%.

 

 

More 10y bid after data; 2s/10s steeper

10-year swaps have seen some decent amount of paying interest since market open, as some players adjusted further their inflation expectations.

 

10-year started off the day with trades around 0.675%. Paying then intensified a tad after the inflation data and it traded up to 0.71% intraday. These compared to previous close of 0.6675%.

 

2s/10s swaps steepened up by around 0.25bp to 60bps.

 

 

New issues

  • Keikyu Corp priced JPY20bn in 0.818%, July 27, 2033 bonds at JGBs + 34bps.

     

  • Kyushu Leasing sold JPY5bn in 0.764%, July 27, 2028 bonds at JGBs + 64bps.

     

  • Mitsubishi HC Capital raised JPY30bn via selling the following bonds:

     

    • JPY10bn, 0.454%, July 27, 2028 at JGBs + 0.33bps.

    • JPY20bn, 0.300%, July 27, 2026.

     

  • Nippon Kowa Real Estate issued JPY20bn in 0.830%, July 27, 2028 bonds.

     

  • Nishimatsu Construction priced JPY20bn in 0.600%, July 27, 2028 bonds at JGBs + 47.6bps.

     

  • Topy Industries raised JPY5bn via selling the following bonds:

     

    • JPY2bn, 0.650%, July 27, 2026.

    • JPY3bn, 0.900%, July 27, 2028.

     

  • West Nippon Expressway sold JPY50bn in 0.369%, July 27, 2028 bonds. Priced at JGBs + 24.5bps.

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