Futures Back Close To Week To Date Lows on Core Yield Surge

The surge in core yields saw JGB futures finished lower in post-Tokyo trade, JBU3 back to 148.12, -.14. This came after we got to fresh highs near 148.40 earlier in Tuesday's session. We haven't spent much time below 148.10 this week, which may be an early focus point in Wednesday trade.

• Core bonds were pressured by the sharp move higher in UK yields, which came post better than expected UK jobs/wages data. For the US, yield weakness post the CPI print proved to be short lived. The US 2yr yield is back to mid Mar levels (near 4.67%).
• The local data calendar is empty today. We get data tomorrow (May trade balance, core machine orders and weekly investment flows) ahead of Friday's BoJ decision.
• MNI also reported that there is no prospect that the Bank of Japan will scrap yield curve control this year, because even if policymakers become confident of a virtuous cycle between wage hikes and price rises they would still want to avoid any sharp rise in interest rates, MNI understands.
• Whilst it is possible that the BOJ could adjust the parameters of its yield curve policy, perhaps by modifying the zero percent target rate at the centre of its -0.5% to 0.5% tolerance band for the 10-year bond, this would only be to mitigate unwanted bond market distortions. See this link for more details.