Iran News – JPN GOVTS CLOSE: JGBs up in very quiet trade, linker auction strong
By Takahiro Okamoto
TOKYO, May 17 (IFR) – [JGBs]
It was a very quiet start to the week for JGBs, with no trades seen in plain-vanilla issues in the first four hours, but a fall in US yields in Asia and Japanese stocks pushed JGB prices a bit higher.
JGB futures opened at 151.41, up six ticks from Friday following extended gains in US Treasuries. After easing a bit to the day’s low of 151.38 around 9pm, they resumed rising.
The cash market was very quiet, especially in the morning session. We heard of trades in a CPI-linked issue ahead of today’s auction, but there were no trades in plain-vanilla bonds all morning.
In the early afternoon, the Nikkei fell more than 400 points, sending futures up to the day’s high of 151.44. It was at 12:48pm, or four hours after the market opened, that the first trade of the day was seen. The 10-year on-the-run JB362 traded at 0.075%, firming 0.5bp from Friday. The 20-year off-the-run JL175 and 30-year off-the-run JX69 followed suit, both firming 0.5bp, but as of 1:23pm, trades were seen only in the three issues.
Activity never picked up till the 3pm close, but futures held up all day. Despite the gains in futures, 30-year yields moved sideways at 0.65%, indicating that investors saw no need to buy 30-year bonds aggressively at the moment.
Today’s quarterly 10-year CPI-linked note auction came out stronger than some had anticipated, stopping at a price of 101.90 or -0.185%. The bid-to-cover ratio was 3.82, improving from 3.07 in February, but a coverage ratio at a linker auction in May is often high. Given the 10-year JB362 being at 0.075%, the BEI is about 26bp. “Inflation in Japan is low, but the auction result was strong,” said a dealer at a Japanese securities house. “Perhaps the result was inspired by inflation concern overseas.” He also thinks some perhaps had no choice but to bid strongly if they really needed the paper because the issue size was only ¥200bn.
In the repo market, the 20-year on-the-run JL176 remained squeezed. If someone needs to borrow it until Friday’s 20-year reopening auction, he/she has to take a very expensive offer at -150bp. The one-day borrowing costs were -40bp to -50bp, but repo activity was very subdued today, reflecting the quiet cash bond market. The five-year on-the-run JS147 was also expensive around -30bp to -35bp. A repo market broker told us that shorts on the five-year issue were not very large. Meanwhile, the rate on general collateral (GC) repo moved sideways around -9bp.
For tomorrow, the direction will be determined by US Treasuries, in our view, but activity will continue to be subdued as no auction or Bank of Japan JGB buying operations are scheduled.
Futures +0.07 @151.42, open 151.41, high 151.44, low 151.38, volume 10,372
JGB 02-year yield untraded on JBTC, but +0.1bp @-0.132%
JGB 05-year yield untraded on JBTC, but -0.5bp @-0.1025%
JGB 10-year yield -0.5bp @0.075%
JGB 20-year yield untraded on JBTC, but -0.5bp @0.437%
JGB 30-year yield 0.0bp @0.650%
JGB 40-year yield untraded on JBTC, but -0.2bp @0.697%
02-year swap rate -0.250bp @-0.03125%
05-year swap rate -0.250bp @0.00250%
07-year swap rate -0.250bp @0.04375%
10-year swap rate -0.375bp @0.12125%
20-year swap rate -0.625bp @0.38500%
30-year swap rate -0.625bp @0.52250%
5-year USDJPY xccy basis +0.25bp @-28.375bp
Nikkei -259.64pt (-0.92%) @27,824.83
[Upcoming auctions (GMT)]
19May 0120 ¥3.5trn 1-year auction
19May 0130 ¥2.5trn 5-year auction
21May 0120 ¥6.3trn 3-month auction
21May 0130 ¥1.2trn 20-year auction
24May 0120 6-month auction
25May 0130 liquidity tap auction (for 5yr-15.5yr)
27May 0130 40-year auction
28May 0120 3-month auction
31May 0130 2-year auction
[Upcoming BoJ operations]
20May 0110 BoJ to buy ¥475bn 1-3yr, ¥450bn 5-10yr, ¥50bn 25yr+ JGBs
24May 0110 BoJ to buy ¥475bn 1-3yr, ¥450bn 3-5yr JGBs
28May 0110 BoJ to buy¥450bn 3-5yr, ¥450bn 5-10yr JGBs
31Apr 0800 BoJ to announce JGB buying plan for June
[Upcoming events (GMT)]
24May 1105 BoJ Kuroda’s online speech at Intl Conference
26May 0130 BoJ Suzuki’s speech at online meeting, presser at 0500GMT
02Jun 0130 BoJ Adachi’s speech at online meeting, presser at 0500GMT
03Jun 0845 BoJ’s meeting with banking accounts
04Jun 0630 BoJ’s meeting with JGB dealers
04Jun 0830 BoJ’s meeting with JGB investors
17-18 June- BoJ’s two-day policy meeting, Kuroda’s presser at 0630GMT
22Jun 2350 BoJ minutes of Apr policy meeting
27Jun 2350 BoJ summary of opinions at Jun policy meeting
29Jun —- BoJ policy board Masai’s term ends
[Upcoming economic data (GMT)]
17May 23:50 Q1 GDP, prev 3% q/q, poll -1.2%
17May 23:50 Q1 GDP Annualised, prev 12.7% q/q, poll -4.6%
17May 23:50 Q1 GDP Private Consumption Prelim, prev 2.2% q/q, poll -2%
17May 23:50 Q1 GDP Capital Expenditure, prev 4.5% q/q, poll 1.1%
17May 23:50 Q1 GDP External Demand, prev 1% q/q, poll -0.2%
17May 23:50 Q1 GDP Deflator YY Prelim, prev -1.6% y/y
17May 23:50 Apr Exports
17May 23:50 Apr Imports
17May 23:50 Apr Trade Balance Total
18May 04:30 Mar Tertiary Industry Activity NSA, prev -1%
19May 04:30 Mar Industrial O/P Revised SA, prev -1.3% m/m
19May 04:30 Mar Capacity Utilisation SA, prev -2.8% m/m
19May 04:30 Mar Industrial O/P Revised SA, prev -3.1% y/y
19May 23:00 May Reuters Tankan mfg DI, prev 13
19May 23:00 May Reuters Tankan non-mfg DI, prev -3
(Reporting by Takahiro Okamoto; Editing by Vincent Baby)
(([email protected]; +813-6441-1773))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.