BoJ Matters At The Fore, U.S. Steepener Flow Seen

The U.S. Tsy complex trader lower in Asia-Pac hours, with T-Notes unwinding most of their FOMC inspired gains. FV/TY and FV/US futures block flow dominated, steepeners in play across both of those inter-contract spreads, with speculation ahead of tomorrow's BoJ decision also adding some pressure to the space during overnight trade. T-Notes last -0-09+ at 131-25+, while cash Tsys have twist steepened, with 30s running ~3.0bp cheaper on the day, building on Wednesday's theme.

• JGB futures trade away from their early afternoon lows to last print 9 ticks lower on the day, ~25 ticks from worst levels. The language employed in a Nikkei article pointing to the potential for the Bank to widen its permitted 10-Year JGB yield trading band to -/+0.25% from the current -/+0.20% at tomorrow's decision is perhaps not as forceful as the title, using phrases like "envisioned policy change" and "will be looking at measures," as opposed to the more forceful title of "BoJ To Widen Interest Rate Target Range To Support Banks." Longer dated JGBs are now back to unchanged on the day after trading around 3.0bp cheaper in the early part of the Tokyo afternoon, with the 7-10 Year zone sitting ~0.5bp cheaper on the day.
• Aussie bonds traded heavily in the wake of a much stronger than expected domestic labour market report which saw the unemployment rate unexpectedly plummet to 5.8%. The broader round of core FI weakness stemming from the aforementioned speculation re: the BoJ applied some fresh pressure, although Aussie 10s managed to unwind some of the early labour market underperformance on the bounce from worst levels into the Sydney close. YM -4.0, XM -7.5 into the bell.