Cash Curve Twist-Flattener, BoJ Weighs On Short-End, Holiday On Monday

JGB futures are holding weaker, -32 compared to the settlement levels, but near Tokyo session highs.

• Outside of the previously outlined Money Stock data, there hasn't been much in the way of domestic drivers to flag.
• Cash US tsys are 2-3bps richer in today’s Asia-Pac session, after yesterday’s jobless claims-induced sell-off.
• Given the lack of domestic data today and the strength in US tsys, today’s price action in JGBs appears to reflect a realisation that the BoJ intends to continue to tighten policy notwithstanding the BoJ Deputy Governor’s recent dovish comments.
• (Bloomberg) “The mixed BoJ communications will only spook more volatility,” said Charu Chanana, head of currency strategy at Saxo Markets. “If only they keep their communication aligned, at least that may spare them from panic moves and unnecessary volatility both in yen and equities.” (See link)
• The cash JGB curve has twist-flattened, with yields 3bps higher to 4bps lower, pivoting at the 30s. The benchmark 10-year yield is 1.5bps higher at 0.865% versus the cycle high of 1.108%.
• The swap curve has bull-flattened, with rates flat to 5bps lower. Swap spreads are tighter.
• Next week, the local market is closed on Monday for the Mountain Day holiday, ahead of PPI data on Tuesday.