Core FI Firmer Post-BOJ, And Ahead Of Likely Soft Euro Inflation

Core FI sits firmer across the board Tuesday as 2s10s curves bull flatten, with the BoJ decision overnight being viewed as a dovish pause. Gilts and Treasuries outperform Bunds in spite of Eurozone CPI tracking to come in below sub-3% according to MNI estimates.

• The BoJ changed the language on the 1% upper bound for the 10-year JGB yield, now referring to it as a "reference point" rather than a strict bound. The move to add more flexibility was less hawkish than expected after Nikkei reported that the BoJ would tweak the YCC framework after the European session yesterday.
• Gilt futures are up 54 ticks at 93.18 with 10y yields down -5.3bp at 4.505%. The softening in the BRC Shop Price Index overnight (to 5.2% Y/Y from 6.2% prior) may be providing additional support here.
• TY1 futures are up 0-5+ at 106-12+ with 10y UST yields down -5.3bp at 4.842%. The main domestic interest yesterday came with Treasury borrowing estimates - the Q4 estimate was $76bln lower than previously announced in July, due to projections of higher receipts.
• Bund futures are up 42 ticks at 129.15 with 10y Bund yields down -2.6bp at 2.794%. French CPI came inline and did not move the needle while German retail sales came in softer than expected.
• Peripheries are mixed vs Bunds at 10-year handle, with the 10-Yr BTP/Bund spread 1.3bps wider at 192.9bps and the 10-year PGB/Bund spread 1.3bps tighter at 69bps. Italian flash Q3 GDP was stagnant, slightly below expectations of a 0.1% rise Q/Q and Y/Y.
• Today's docket includes the EZ-wide inflation estimate, alongside Italian/German supply and ECB-speak from de Cos, Visco, Muller, Nagel, and Guindos. In the US, we get the Employment Cost Index and the October MNI Chicago PMI.