Intriguing RV graphs: Outlook for distorted JGB super-long sector
Key points
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JGB super-long sector has become distorted; asset swap spreads narrowing vs recent peaks, but JGBs with remaining maturities of around 25 to nearly 30 years underperforming
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Background factors: (1) decline in liquidity, (2) combined selling with stocks, (3) strong demand for some previously issued 40-year JGBs, and (4) investments prioritizing medium/long-term JGBs
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Distortions could ease from October. Receding of fiscal expansion concerns, reduction in super-long JGB issuance would lend support; still, FY-end developments warrant attention