Bear-Steepener, Light Local Data Calendar, 2Y Supply Due

In Tokyo morning trade, JGB futures are little changed compared to settlement levels as overnight strength is unwound.

• Jibun Bank and S&P Global released April's flash PMIs: Mfg rose to 49.9 from 48.2 in March; Services rose to 54.6 from 54.1 in March; and Composite rose to 52.6 from 51.7 in March.
• The market’s focus, however, remains on the BoJ Policy Decision on Friday. No policy adjustment is anticipated at the two-day meeting ending on Friday. However, a growing number of economists foresee the possibility of the BoJ implementing another rate hike in October, with many highlighting July as a potential earlier timeframe. The prospect of a weaker yen is cited among the factors that could accelerate this timeline.
• Nonetheless, it is anticipated that the BoJ will revise its inflation forecast for the current fiscal year to 2.6% and project a 2% price growth for the fiscal year commencing in April 2026. This adjustment reflects optimism regarding wage trends.
• Ahead of today’s 2-year supply, the cash JGB curve bear-steepened, with yields flat to 2bps higher. The benchmark 10-year yield is slightly lower at 0.884%, just shy of the YTD high of 0.891%.
• The swaps curve has twist-steepened, pivoting at the 10s, with rates 1bp lower to 4bps higher. Swap spreads are tighter out to the 7-year and wider beyond.