(Bloomberg) -- Futures suggest that Japan’s bond market is functioning better, reducing pressure on the central bank to alter its monetary-easing program.

The spread between the June contract for 10-year bond futures and the cheapest-to-deliver securities shrank this month to the lowest level since the contracts began trading in September, according to data compiled by Bloomberg. The smaller gap indicates there’s now enough liquidity for traders to arbitrage between bonds and futures after the Bank of Japan reduced its debt purchases.

The market is reverting to a condition that was prevalent before the BOJ started to buy unlimited quantities of cheapest-to-deliver securities in June last year, with notes and futures moving in tandem at a fair level, said Ataru Okumura, senior rates strategist at SMBC Nikko Securities Inc.  

--With assistance from Yumi Teso.

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