Cash Bonds Cheaper As BoJ Ueda’s Remarks Point To More Tightening

JGB futures are holding weaker, -23 compared to the settlement levels.

• Outside of the previously outlined National CPI, there hasn't been much in the way of domestic drivers to flag.
• BoJ Governor Ueda hasn't sounded as dovish as Deputy Governor Uchida in early August, in his appearance before both houses of parliament.
• Ueda noted that current rates are still quite low and if the economy remains in good shape, the central bank can raise rates up to neutral levels (RTRS).
• Ueda didn't state what the neutral level was, but noted there is high uncertainty. He added current rates are still far below the likely neutral rate (RTRS).
• Overall though Ueda's remarks so far today point to room for further policy adjustments.
• Cash US tsys are flat to 1bp richer, with a slight steepening bias, ahead of Fed Chair Powell’s address at the Jackson Hole Symposium later today.
• The cash JGB curve has shifted cheaper, with yields flat to 2.5bps higher. The benchmark 10-year yield is 2.3bps higher at 0.900% versus the cycle high of 1.108%.
• Swap rates are higher, with the 20-40-year zone leading (1-5bps higher). Swap spreads are tighter apart from the 20-40-year zone.
• Next week, the local calendar will see Coincident & Leading Indices on Monday, ahead of PPI Services on Tuesday.