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Futures At Session Highs Despite Tokyo CPI Beat, BOJ Policy Decision On Tuesday

JGBS

JGB futures are richer and at session highs, +21 compared to settlement levels, after initially cheapening on the back of higher-than-expected Tokyo CPI data.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo October CPI data.
  • Bloomberg reports that Japan’s life insurers plan to boost holdings of unhedged foreign debt while approaching purchases of yen-denominated bonds with caution as they seek clarity on when the central bank may adjust policy. (See link)
  • The cash JGB curve has slightly twist-flattened, pivoting at the 5s, with yields 0.7bp higher to 1.5bps lower. The benchmark 10-year yield is 0.4bp lower at 0.871%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.892% set yesterday.
  • Swap rates are also slightly mixed, with swap spreads mixed.
  • On Monday, the local calendar sees Jobless Rate, Retail Sales, Dept. Store and Supermarket Sales and Industrial Production data, along with 2-year supply.
  • The BOJ’s Policy Decision is due on Tuesday, with the prevailing consensus anticipating that the BOJ will uphold its existing policies. In a Reuters survey of economists conducted between October 17-25, 25 out of 28 economists expected no change in policy.

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