Curve Twist Steepens, Futures Outperform, YCC Band Breached

JGB futures extended on their early bid into the bell and close just shy of best levels, +26. Cash JGBs are 3bp richer to 3bp cheaper, twist steepening, with a pivot around 10s (which operate in a narrow range between 0.50-0.51%, just through the peak of the BoJ’s YCC band). 7s outperform on the bid in futures. Weakness in the long end was at least partially linked to payside swap flows, but the move in JGBs in now more notable, with twist steepening also observed on the swap curve.

• Tokyo participants have looked to the latest Bloomberg sources piece and survey covering the BoJ (both of which were released between yesterday’s local close and today’s open), which played down the likelihood of a hawkish policy tweak from the BoJ next week.
• Local data saw downticks in the headline and core Tokyo CPI readings in the month of February (driven by government subsidies surrounding energy), with the prints near enough meeting expectations, while there was a slightly larger than expected uptick in the excluding fresh food and energy metric. This comes after recent rhetoric from BoJ Governor-in-waiting Ueda flagged the likelihood of a slowing inflationary impulse in the months ahead. Meanwhile, the latest labour market report saw a modest downtick in the unemployment rate.
• The offer to cover ratios covering today’s BoJ Rinban operations were subdued to average (1.95-2.25x).
• Elsewhere, PM Kishida instructed the LDP to compile a package of additional measures to further curb the burden of the recent run of inflation.
• The aforementioned BoJ monetary policy meeting headlines next week’s local docket, with confirmation votes for BoJ Governor-in-waiting Ueda also slated.