10s Lead Post-BoJ Rally As Kuroda’s Leaves Policy Unchanged At Final Meeting

JGBs were notably richer on Friday, with the initial bid derived from the wider risk-off feel evident since NY hours developing further as the BoJ left its monetary policy settings unchanged.

• While the clear consensus looked for no change in the Bank’s monetary policy settings, the degree of conviction displayed in that view was highly variable as this was BoJ Governor Kuroda’s final monetary policy meeting, with the spectre of December’s surprise YCC tweak adding an extra layer of uncertainty.
• Post-BoJ decision moves looked very much like an unwind of hawkish plays, with futures over 100 ticks higher on the day (albeit not anywhere near meaningful resistance after the recent re-establishment of a technical downtrend).
• Cash JGBs are 1-11bp richer, with 10s now leading the move, sitting around the 0.39% mark after operating around the BoJ’s 0.50% YCC cap pre-decision. No change in tone of the BoJ’s post-meeting statement was key, with Kuroda playing a straight bat as he prepares to hand control over to Ueda (as opposed to tweaking policy to facilitate a ‘smoother’ handover and less pressure on Ueda).
• Swap spreads are now tighter out to 5s but wider beyond that, after swaps initially outperformed bonds into the BoJ decision.
• Kuroda’s final post-meeting press conference will get underway shortly.