Futures At Lows At Lunch, No Change Expected At Tomorrow’s BOJ Meeting, Focus On YCC

At the Tokyo lunch break, JGB futures are weaker and at session lows, -15 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, with the data calendar empty ahead of the BOJ policy decision tomorrow.
• As for the decision expected this week, our analysis aligns with the prevailing consensus, which foresees the BOJ maintaining its existing policies in the upcoming announcement.
• Regarding the BOJ's YCC policy, most market participants do not foresee any changes this week, although many hesitate to completely rule out the possibility. For proponents of a YCC adjustment, the precise nature of such an adjustment remains uncertain. Some posit that the YCC ceiling will be raised from its current 1.0% to 1.5%. Others suggest the BOJ might opt to increase its 10-year JGB target from the current level of around 0% to 0.25% or even 0.5%. See the MNI BOJ Preview here.
• Cash JGBs are cheaper across the curve, with yield flat to 1.1bps higher. The benchmark 10-year yield is 1.1bps higher at 0.892% versus the cycle high of 0.897% set today.
• The 2-year is 0.6bp higher at 0.099% ahead of today's supply. Bloomberg poll suggested a low price of 99.98.
• Swap rates are slightly higher across maturities. Swap spreads are mixed across the curve.