JPY Swaps: 10s/20s steeper; Cautious 10y ahead of BOJ

Steep curve 9 Nov 2020
Trading in JPY swaps has been cautious ahead of the BOJ policy meeting. 10y saw paying but 10s/20s swaps were steeper.

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  • 10y yield hits fresh high

  • Cautious 10y bid; 10s/20s steeper


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10y yield hits fresh high

JGB future was down by more than 20-ticks in the morning, but trimmed losses to mark only 11-ticks lower around mid-morning domestic trading, and sustained such momentum after mid-day following strong demand at the JGB sale.  


Earlier today, the MOF sold JPY498.5bn worth of its JPY500bn JGBs in the enhanced liquidity sale (Number 389). The auction drew bids worth 3.48 times, up sharply from 2.91 times last month. Average yield was -0.002%.


In mid-afternoon Tokyo trading the lead bond future was down 17-ticks at 145.55, and the yield on the benchmark 10-year JGB was half a basis point higher at its fresh high of 0.715%.



Cautious 10y bid; 10s/20s steeper

Players were generally in a cautious mode and such sentiment would likely extend till the BOJ policy meeting later this week, according to a swapper. The source reported swap trades mostly around the liquid tenors. 10-year, for example, traded flat to 0.25bp higher, steepening 2s/10s marginally to 68bps.


10s/20s swaps steepened up by 0.75bp to 48.25bps amid the underperformance in 20-year.


20-year traded up to 2bps higher at the open and was last seen traded 0.75bp higher of 1.3675%.