BoJ May Be Forced To Step In Again

JGB futures shed 21 ticks in overnight dealing, going out just above worst levels of post-Tokyo trade, as a move higher in U.S. Tsy yields applied pressure.

• This may push the BoJ into a more active round of defence re: the enforcement of its YCC settings, with Wednesday seeing a late round of fixed rate operations as 10-Year yields showed above the upper limit (0.25%) of the BoJ’s permitted trading band.
• Wednesday’s weakness in U.S. Tsys will likely apply fresh steepening pressure to the JGB curve early today.
• Elsewhere, currency dynamics continue to be eyed after USD/JPY topped out just below Y150.00 on Wednesday.
• The monthly trade balance reading and weekly international security flow data from the Japanese MoF headline the domestic docket on Thursday, with participants also set to be on the lookout for any scheduled BoJ JGB purchase operations, given the aforementioned dynamics.