Cheaper But Off Session Lows After The BOJ’s Dovish Tweak

ACGBs (YM -4.0 & XM -6.0) sit cheaper but have pared earlier losses after the BOJ delivered a dovish Yield Curve Control (YCC) tweak. Overall, the BOJ decision aligned with general market expectations. It involved a minor adjustment in the wording to provide room for flexibility regarding the upper limit for long-term yields while maintaining its accommodative policy stance.

• There have been few domestic drivers other than the previously outlined private sector credit data.
• US tsys initially reacted positively to the BOJ decision, although like JGBs, there has been a paring of the initial gains. Cash US tsys are 2-3bps richer in Asia-Pac trade.
• Cash ACGBs are 3-6bps cheaper, with the AU-US 10-year yield differential 6bps wider at +6bps.
• Swap rates are 3-6bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing flat to -3.
• RBA-dated OIS pricing is flat to 2bps firmer across meetings. Terminal rate expectations jump to 4.54%.
• Tomorrow, the local calendar sees CoreLogic House Prices, Building Approvals and Judo Bank PMIs.
• Tomorrow, the AOFM plans to sell A$800mn of the Apr-33 bond.
• SAFA priced an A$1bn increase of the 4.75% 24 May 2038 Line. It priced at 116.5bps over the 10-year futures contract at a yield of 6.15%.