Firmer, New BoJ Board Member Address Eyed

JGB futures pushed higher as we worked through the Tokyo morning, although bulls failed to force a break of the overnight session high, leaving the previously outlined technical resistance in place. Local headline flow has been light thus far, leaving wider core FI dynamics and the unwind of an early uptick in crude futures at the fore, providing support for JGB futures, which hit the lunch bell +59.

• Cash JGBs run little changed to ~5bp richer on the day, playing catch up to Friday’s richening in wider core global FI marlets, with swaps lagging across the curve, resulting in a widening of swap spreads.
• BoJ Rinban operations yielded the following offer/cover ratios:
• 1- to 3-Year: 2.66x (prev. 1.20x)
• 3- to 5-Year: 2.86x (prev. 2.27x)
• 5- to 10-Year: 1.52x (prev. 2.25x)
• 10- to 25-Year: 4.85x (prev. 3.05x)
• The BoJ has flagged an impending address from new board members Takata & Tamura (17:00 Tokyo/09:00 London). As noted by our policy team in their most recent insight piece, Takata, most recently an economist at brokerage Okasan Securities, has previously voiced concern over side-effects of powerful monetary easing, although he is expected to side with current policy settings at the upcoming BoJ decisions. Meanwhile, Tamura, most recently a senior adviser at Sumitomo Mitsui Banking Corp, has reportedly voiced concern on the BoJ’s bond market operations distorting markets, but is also likely to support Kuroda when it comes to maintaining easy policy through the end of the Governor’s term.