JPY Swaps: Longs given after earlier bid; Inflation matches forecast

Japanese Yen Notes
The JPY rates market was firmer but there was also paying in long-dated swaps in earlier trading. July inflation matched forecast.

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  • Inflation matches forecast

  • Longs given after early 10-20y bid


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Inflation matches forecast

JGB future has followed other fixed income market in Asia firmer today, with Australia leading the move. The rally has been driven by thoughts that recent selloff was excessive and that a market correction or rebound is due. Domestic data meeting consensus has also comforted players who were otherwise cautious about buying JPY rates.


Official data released earlier today showed that inflation in Japan was 3.3% in July, unchanged from June and meeting economists’ forecast. Inflation excluding fresh food was down from 3.3% to 3.1% while those excluding fresh food and energy was up from 4.2% to 4.3%.


JGB future was up 30-ticks at 146.64, and the yield on the benchmark 10-year JGB was down half a basis point at 0.637%.



Longs given after early 10-20y bid

Receiving in 10-year swaps only emerged after mid-day. It traded unchanged of 0.825% at the open and was paid up near 0.85% near lunch break. It was then offered down to 0.8075% in late-afternoon Tokyo trading, flattening 2s/10s swaps by 1.5bps to 67bps. A dealer said 2s/10s swaps have indeed steepened up too much of late and so it should prompt receiving in 10-year. However, players were wary about a currency intervention which would otherwise affect 2-year rate and so they have taken a wait-and-see approach.


Weak 20-year sale on the previous day continued to back some light paying in 20-year at 0.5bp higher of 1.32% at the open. Offered-side flow began around mid-day when it traded 1.5bps lower. 10s/20s were 0.5bp flatter at 48.25bps at time of writing.