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JGBs not looking good in a new year

ADMIN || 5th January 2026

JGB futures are weaker in early Monday action, and the contracts are likely to enter a choppy downward path as traders grapple with 10- and 30-year debt auctions this week. The 10-year sector is vulnerable as a hedge against bigger spending by the Takaichi administration. While long duration bonds could outperform with net issuance set to decline relative to recent years.

The big theme for the months ahead will be yield curve flattening, driven by outperformance in super-long bonds. In the near term, a weak yen will provide a bearish edge for JGB contracts.

Also in the mix will be Labor cash earnings data this week, forecast to be softer than the previous month. However, the risk for JGBs is a firmer print as BOJ Governor has put wage increases front-and-center amid a drive toward neutral interest rates.

On the US side, pressure will be there due to very large investment grade bond supply in this week estimated to be around 60 BN USD which is almost double of IG weekly average of 30 BN USD for last CY. This supply is due to corporates returning back to issuance post the holidays.

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