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Cheaper Across The Curve, BOJ Policy Decision Next Tuesday

JGBS

JGB futures are holding cheaper, -38 compared to the settlement levels, and marginally above the session’s worst level.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Flash Jibun Bank PMIs. The Tertiary Industry Index has recently printed -0.8% m/m in October versus a +0.1% estimate and a revised -1.2% prior.
  • Cash US tsys are sitting 3bps cheaper so far in the Asia-Pac session, with local participants possibly profit-taking following an assertive post-FOMC rally. Considering that the US STIR market has priced 130bps of easing by November 2024, compared to the dot plot median easing of 75bps for 2024, a cautious view towards the near-term outlook for the market probably makes sense.
  • Cash JGBs are cheaper, with the futures-linked 7-year (3.5bps higher) underperforming. The benchmark 10-year yield is 2.7bps higher at 0.701%. The 20-year is 3.4bps higher at 1.437% versus yesterday’s pre-auction low of 1.36%.
  • Swap rates are 1-4bps higher across maturities.
  • On Monday, the local calendar is empty, ahead of the BOJ Policy Decision on Tuesday. While certain investors interpreted recent statements from BOJ officials as a sign of an imminent policy shift, we are inclined to view it as a step in the extended process of preparing for a seamless transition.
  • The BOJ will also conduct Rinban operations covering 1- to 25-year JGBs on Monday.

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