JPY Swaps: 10y bid; 2s/20s too steep

Steep road
10y JPY swaps saw further paying after yesterday's hawkish comments by Ueda. 2s/20s swaps were too steep and may trigger a correction.

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  • 10y bid; 2s/20s too steep

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10y bid; 2s/20s too steep

The selloff in the JPY rates market continued today as an aftermath of hawkish comments from BOJ Governor Ueda on the previous day. JGB future was down by 18-ticks in the morning session before trimming losses after lunch break. It was up by 8-ticks briefly before being marked unchanged at 145.56 at time of writing. The yield on the benchmark 10-year JGB was marginally higher at it fresh high of 0.703%.


Many market players had viewed Ueda’s comments as a way to verbally intervene the currency  market. However, the appreciation in the yen has failed to sustain and the pair rose back to levels near 147 in overnight trading and has been traded mostly above 146.6 in domestic trading. Players have therefore almost given up any expectations about further movement in the currency market.


Swap trading has been mostly around 10-year. A dealer reported flows mostly around 0.88% although there were also activities up to 0.89% intraday. These compared to previous close of 0.87%.


20-year saw paying at up to 1.385% before being marked 0.5bp higher of its fresh high of 1.375% at time of writing. 2s/20s swaps were unchanged at 118bps but a swapper reckoned the slope has already steepened up to levels that may trigger a correction in the near future. 2s/20s swaps were as steep as near 119bps last week. It was at levels below 100bps in late-July.



New issues

  • JFM sold the following bonds:


    • JPY35bn, 0.825%, September 28, 2033 at JGBs + 12bps.

    • JPY25bn, 1.485%, September 28, 2043 at JGBs + 5.5bps.


  • JGC Holdings priced JPY10bn in 0.603%, September 19, 2028 bonds at JGBs + 30bps.