Cash Bonds Little Changed Beyond The 1-year, Awaiting BoJ Policy Decision

In Tokyo morning trade, JGB futures are weaker, -13 compared to settlement levels, after slightly extending overnight weakness.

• The local market awaits today’s BoJ Policy Decision, after Nikkei added to recent reports across multiple newswires that the central bank is to end YCC and ETF purchases along with the heavily sourced exit of negative interest rates.
• While a move in March is not set in stone, we anticipate the BoJ to announce the attainment of its 2% price stability target and exit NIRP.
• Despite the debate in the markets over March versus April, the key takeaway from today’s meeting is that the BoJ seems to have made up its mind to act by the end of spring.
• Therefore, even if the BoJ opts to hold off in March, it would be expected to provide a clear indication that it is contemplating action at its next policy meeting scheduled for April 25th-26^th. (See MNI BoJ Preview here)
• Cash JGBs are slightly cheaper, apart from the 1-year yield which is 2bps higher at 0.093%. The benchmark 10-year yield is 0.4bp higher at 0.771% versus its YTD high of 0.801%.
• The swaps curve has twist-steepened, with rates 1bp lower to 4bps higher. Swap spreads are tighter out to the 10-year and wider beyond.