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Bear-Steepening Extends After BoJ Takata's Speech

JGBS

JGB futures have spiked lower, -16 compared to settlement levels, following the release of a speech from BoJ Board Member Takata. Key points (BBG):

  • PRICE TARGET IS FINALLY COMING INTO SIGHT
  • JAPAN'S ECONOMY IN IS INFLECTION POINT OF CHANGING 'NORM' THAT PEOPLE THINK WAGES, PRICES ARE NOT RISING
  • MOMENTUM IS RISING IN THIS SPRING'S WAGE TALKS WITH MANY COMPANIES OFFERING HIGHER-THAN-2023 WAGE HIKES
  • NEEDS TO CONSIDER TAKING FLEXIBLE RESPONSE INCLUDING EXIT FROM MONETARY STIMULUS
  • HIGH WAGE HIKE RATE WOULD PROMPT CONTINUAL EXPECTATIONS THAT HOUSEHOLD INCOME WILL RISE
  • Cash JGBs are little changed out to the 5-year but have cheapened further beyond, with yields 2-3bps higher. The benchmark 10-year yield is 1.3bps higher at 0.713% versus the Nov-Dec rally low of 0.555% and the February high of 0.770%.
  • The swaps curve has bear-steepened, with rates flat to 3bps higher. Swap spreads are mixed.
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