JPY Swaps: Brief long-end flow; Curve steeper

Japan Shrine
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The Nikkei fell only briefly after China's disappointing easing. Dampened demand for JPY rates saw weaker JGB future and only light long-end flow.

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  • Equity dip-buy dampens demand for JPY rates

  • Brief 10-20y flow; Curve steeper

 

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Equity dip-buy dampens demand for JPY rates

China has brought a disappointment to the market by only trimming 1-year rate by 10bps (Vs consensus of 15bps) while keeping 5-year rate unchanged at 4.2%. This knee-jerked a very short-lived selloff in the Nikkei soon after the announcement before the upward momentum resumed.

 

Market participants said expectation about a market correction has played a stronger role today, driving demand for equities and dampening interest in JPY rates.

 

JGB future was therefore weaker and was down 15-ticks at 146.51 at mid-day. The yield on the benchmark 10-year JGB was up a basis point at 0.638%.

 

 

Brief 10-20y flow; Curve steeper

A trader noticed very subdued trading in swaps today, and said the condition was due to lack of key data flow this week, and as many players were still on holiday during the summer break.

 

There were some brief trades in 10-year in a tight range at just a tad above 0.8175%, up about a basis point from Friday’s close.

 

The swap curve steepened up all the way to the back-end with relatively stronger steepening between the mid-sector and 10-year. 5s/10s swaps, for example, was 0.5bp steeper at 40.25bps while 10s/30s swaps were less than 0.5bp steeper at just above 58.25bps.

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