BoE To Provide BoJ With Some Breathing Room

JGB futures tracked core FI markets higher in post-Tokyo trade, driven by the well-documented BoE action, leaving the contract +44 at the close of the overnight session.

• The rally in core global FI markets will give the BoJ some breathing room when it comes to YCC, although you can be sure that investors will look to test the BoJ again, if they get the chance.
• 20+-Year yields will come under the most scrutiny, given the recent run to fresh multi-year highs in both outright yields and the likes of the 10-30-/Year yield curve, given the lack of relative BoJ control on JGBs that are further out the curve and the recent cheapening pressure for broader bond markets.
• 2-Year JGB supply and the latest round of international security flow data from the MoF headline the domestic docket on Thursday, with Tokyo reaction to Wednesday’s wider developments set to dominate during the early rounds of dealing.