Tighter U.S. Swap spread and its Impact on JGBs

Via JPM, recent tighter U.S. swap spread impacts on USDJPY basis to wider to deeply negative and JPY swap spread.

These make the JGBs more attractive because both U.S. and Japanese Libor cost is cheaper and widened USDJPY basis, seen below chart, enhances hedge premium for investors delivering USD. So, JGB yields are stable with firm demands despite upward pressure in U.S. treasury yields.

JPM argues this is structural change in JGBs market, although they are neutral on the view of U.S. swap spread market.

However, as I posted previously, current tightening in swap market is mainly led by supply and demand sides mainly as corporate bond issuance increases rapidly and the dealers' positions are screwed.

Anyway, today's JGBs yield rose hardly as well...