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Bear-Steepener Ahead Of BoJ Policy Decision Despite Tokyo CPI Miss

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In Tokyo morning trade, JGB futures are holding around overnight closing levels, -36 compared to settlement levels, after the spike lower after lower-than-expected Tokyo CPI is quickly reversed.

  • Tokyo's April CPI print was much weaker than expectations. The headline was 1.8% y/y, versus 2.5% projected (prior was 2.6%). The ex-fresh food measure was 1.6% y/y, versus 2.2% forecast (2.4% prior). The ex-fresh food, energy measure was 1.8% y/y in April (2.7% forecast and 2.9% prior).
  • Momentum on the core measures is back to 2022 levels, while headline printed 1.8%y/y back in January. The core ex-energy and all food index eased back to 1.4% y/y from 2.3% in March.
  • (MNI) At today's meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%. This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal. (See MNI BoJ Preview here)
  • The cash JGB curve bear-steepened, with yields flat to 3bps higher. The benchmark 10-year yield is 3.1bps higher at 0.930% after pushing to a fresh YTD yield high of 0.933%.
  • The swaps curve has twist-steepened, pivoting at the 20s, with rates -3bps to +4bps. Swap spreads are tighter out to the 30-year.
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In Tokyo morning trade, JGB futures are holding around overnight closing levels, -36 compared to settlement levels, after the spike lower after lower-than-expected Tokyo CPI is quickly reversed.

  • Tokyo's April CPI print was much weaker than expectations. The headline was 1.8% y/y, versus 2.5% projected (prior was 2.6%). The ex-fresh food measure was 1.6% y/y, versus 2.2% forecast (2.4% prior). The ex-fresh food, energy measure was 1.8% y/y in April (2.7% forecast and 2.9% prior).
  • Momentum on the core measures is back to 2022 levels, while headline printed 1.8%y/y back in January. The core ex-energy and all food index eased back to 1.4% y/y from 2.3% in March.
  • (MNI) At today's meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%. This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal. (See MNI BoJ Preview here)
  • The cash JGB curve bear-steepened, with yields flat to 3bps higher. The benchmark 10-year yield is 3.1bps higher at 0.930% after pushing to a fresh YTD yield high of 0.933%.
  • The swaps curve has twist-steepened, pivoting at the 20s, with rates -3bps to +4bps. Swap spreads are tighter out to the 30-year.