JPY Swaps: 10-15y given after dovish Takata; 2s/20s corrects flatter

• JGB future reverses losses after dovish Takata

• 2s/20s corrects flatter; 10-15y offers

• New issues

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JGB future reverses losses after dovish Takata

JGB future was weaker in the morning, tracking the move in the USD rates market on Tuesday which fell due to renewed concerns over the inflation situation there. The lead bond future then erased all the losses after lunch break and closed at its intraday high of 14-ticks of 146.87. The yield on the benchmark 10-year JGB was unchanged at 0.653%.

The rally in JPY rates in the afternoon session was prompted by dovish comments from BOJ’s board member Hajime Takata. Taka said the central bank would need to continue to with monetary easing patiently although the country is seeing early signs of hitting its 2% inflation target.

2s/20s corrects flatter; 10-15y offers

Swap trading has been busy with flows mainly from the 10-year point of the curve. A dealer reported good amount of receiving since early-morning domestic trading. 10-year started off trading a tad to 0.5bp lower in the morning and was then offered down to 1.75bps lower of 0.82% in the afternoon session. There were also some sporadic paying at a basis point higher near market close. 15-year has been mostly offered and traded 0.75-1bp lower on the day.

The front-end has been underperforming the longer-end on the rally, as the yen weakened against the USD further in domestic trading today following the dovish comments. USD/JPY rose pass the 147.8 level in the morning session and eased off to levels near 147 in mid-afternoon.

The swap curve flattened out all the way to the backend. Players had forecast a corrective flattening in 2s/10s, and the slope was half a basis point flatter at 69.25bps today. 2s/20s, which steepened up to its fresh high of near 119bps on Tuesday, was 0.75bp flatter at 118bps. 10s/30s swaps, on the other hand, was 0.5bp flatter at 59.25bps.

New issues

• Aichi Prefecture priced JPY40bn in 0.772%, September 20, 2033 bonds at JGBs + 12bps.

   

• Development Bank of Japan sold JPY20bn in 0.727%, September 20, 2033 bonds.

   

• Hiroshima Prefecture raised JPY30bn via selling the following bonds:

   

  • JPY10bn, 1.410%, September 18, 2043 at JGBs + 5.5bps.

  • JPY20bn, 0.767%, September 22, 2033 at JGBs + 12bps.

   

• JEHDR sold JPY30bn in 0.477%, September 30, 2030 bonds.

   

• Kawasaki Kisen Kaisha Ltd priced JPY8bn in 0.729%, September 11, 2028 bonds at JGBs + 49bps.

   

• Kyoto Prefecture issued JPY20bn worth of bonds in two equal tranches as follows:

   

  • 0.354%, September 20, 2028 at JGBs + 12bps.

  • 0.767%, September 20, 2033 at JGBs + 12bps.

   

• Mitsui Fudosan Co Ltd raised JPY100bn via selling the following bonds:

   

  • JPY10bn, 1.578%, September 10, 2038 at JGBs + 51bps.

  • JPY40bn, 1.831%, September 11, 2043 at JGBs + 48bps.

  • JPY50bn, 1.057%, September 12, 2033 at JGBs + 40bps.

   

• Nara Prefecture sold JPY20bn worth of bonds in two equal tranches as follows:

   

  • 0.752%, June 20, 2033 at JGBs + 10bps.

  • 1.395%, June 19, 2043 at JGBs + 4bps.

   

• NSK Limited priced JPY15bn in 0.539%, September 11, 2028 bonds at JGBs + 30bps.

   

• Osaka Prefecture sold JPY30bn worth of bonds as follows:

   

  • JPY10bn, 0.720%, September 28, 2033.

  • JPY20bn, 1.410%, September 18, 2043 at JGBs + 5.5bps.

   

• Saitama Prefecture  priced JPY20bn in 0.767%, September 27, 2033 bonds at JGBs + 12bps.

   

• Taiheiyo Cement sold the following bonds:

   

  • JPY12.7bn, 0.330%, September 11, 2026.

  • JPY7.3bn, 1.217%, September 09, 2033 at JGBs + 57bps.