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JGBS: Cash Bonds Cheaper, BoJ Ueda Adds To Weight To Hike Discussions

JGBS
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After a choppy Tokyo session, JGB futures are little changed, +1 compared to settlement levels.

  • Japan likely to miss primary budget surplus target for FY2025, sources say "Japan is likely to miss achieving its goal of running a primary budget surplus by the next fiscal year, according to three sources with knowledge of fresh fiscal estimates, as the minority government faces increasing pressure for more spending.” RTRS
  • Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 0.4bp higher at 1.250% after making a fresh cycle high of 1.253% today.
  • The swaps curve has bear-steepened, with rates flat to 4bps higher.
  • “BOJ Governor Ueda: Will raise rates and adjust the degree of monetary support if improvement in economy and price conditions continues” - RTRS
  • BOJ-dated OIS pricing has shifted notably since BOJ Deputy Governor Himino's speech yesterday. The speech was interpreted as another indication that the policy board is leaning toward a 25bp rate hike at its upcoming meeting on January 23–24.
  • Current OIS pricing indicates: a 69% probability of a 25bp hike in January; a cumulative 86% chance by May; and a full 25bp increase not fully priced in until May 2025.
  • Tomorrow, the local calendar will see PPI data alongside 20-year supply.
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After a choppy Tokyo session, JGB futures are little changed, +1 compared to settlement levels.

  • Japan likely to miss primary budget surplus target for FY2025, sources say "Japan is likely to miss achieving its goal of running a primary budget surplus by the next fiscal year, according to three sources with knowledge of fresh fiscal estimates, as the minority government faces increasing pressure for more spending.” RTRS
  • Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 0.4bp higher at 1.250% after making a fresh cycle high of 1.253% today.
  • The swaps curve has bear-steepened, with rates flat to 4bps higher.
  • “BOJ Governor Ueda: Will raise rates and adjust the degree of monetary support if improvement in economy and price conditions continues” - RTRS
  • BOJ-dated OIS pricing has shifted notably since BOJ Deputy Governor Himino's speech yesterday. The speech was interpreted as another indication that the policy board is leaning toward a 25bp rate hike at its upcoming meeting on January 23–24.
  • Current OIS pricing indicates: a 69% probability of a 25bp hike in January; a cumulative 86% chance by May; and a full 25bp increase not fully priced in until May 2025.
  • Tomorrow, the local calendar will see PPI data alongside 20-year supply.