Futures Back To Flat After Gov. Ueda Cools YCC Change Speculation

JGB futures are currently flat to settlement levels but have rebounded from earlier lows after BoJ Governor Ueda's comments in Parliament put an end to speculation of an imminent change to the YCC setting ahead of this week's BoJ policy decision. Governor Ueda responded to a question about the conditions required for the BoJ to consider a tweak to YCC, stating that the BoJ's inflation forecast for the next half-year, year, and year-and-a-half must be strong and close to the target rate of 2%.

• There hasn’t been much in the way of other domestic drivers.
• JBM3 remains comfortably in the range of 147.40-147.92, which it has generally traded in since early April, barring a few probes through the lower limit last week.
• Cash JGB 4-7-year zone has maintained its relative richening versus the 2-year and the 10-40-year zones. The benchmark 10-year yield is 0.2bp lower at 0.470%, below the BoJ's YCC limit of 0.50%.
• Swaps curve twist steepens pivoting in the 20-year zone. Swap spreads are marginally wider across the curve, except for the 2-year and 10-year zones.
• Looking ahead, the local calendar is light until Friday when Tokyo CPI, Retail Sales and Industrial Production data on Friday, ahead of the BoJ Policy Decision on the same day.
• The MoF is scheduled to sell 2-year JGBs on Wednesday.