JPY Swaps: Yen weaker again; 10-20y given; 10s/20s flatter

• 10-20y given; 10s/20s flatter

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10-20y given; 10s/20s flatter

BOJ Governor Ueda’s verbal currency intervention has been proven to have failed. The USD/JPY rose above 147.5 in overnight trading and approached 147.7 in mid-afternoon domestic trading. This has triggered a rally in the Nikkei but failed to drive a selloff in JPY rates.

Players said the ECB hike and further PBOC support in China offered a clear picture that the EU is a step closer to stagflation, and that the economy in China has not been well. These have backed better demand for safe-haven assets.

The PBOC kept its one-year MLF interest rate unchanged but added more fund into the market via key policy loan. This is the 10th consecutive month that the central bank offers support to the market.

In mid-afternoon Tokyo trading JGB future was up 10-ticks at 145.72, and the yield on the benchmark 10-year JGB was down slightly more than half a basis point to 0.702%.

Trading in outright swaps has been very subdued ahead of the long weekend in Japan. A swapper said the market is watching closely the FOMC decision next week although most expect it to pause. However, the ECB hike on Thursday might have triggered some second thoughts from some other players, according to the source.

Flow wise, there was some light receiving in the 10- to 20-year area. 10-year traded down to 1.5bps lower of 0.8775%. 20-year went through 0.75bp lower of 1.365% intraday and was marked at 1.35% at time of writing. 10s/20s swaps flattened out by 0.25bp to 47.74bps.