Futures Cheaper, BOJ Inflation Projection Fears & US Tsys Weigh

In Tokyo afternoon dealings, JGB futures remain weaker, -38 compared to settlement levels.

• With the local data calendar light today (Tokyo Condominiums for Sale data the only release), JGBs weakness over the past 24 hours has reflected the combination of BOJ-induced selling and fresh cycle highs for US tsys.
• JGB futures pushed lower in the overnight session as BBG sources reported that “the BOJ is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal.”
• JGB futures weakness then extended overnight, with US tsys finishing the NY session 8-15bps cheaper after another batch of firm data. However, US tsys are flat to 2bps richer in today’s Asia-Pac session.
• The cash JGB curve has bear-steepened, with yields 0.4bps to 5.1bps higher. The benchmark 10-year yield is 2.6bps higher at 0.807% versus the cycle high of 0.82% set today.
• Mid-session unscheduled bond purchases by the BOJ of Y300bn of 5-to-10-year and Y100bn of 10-to-25-year notes at market yields appeared to, at least momentarily, arrest the push higher in yields.
• Swap rate movements are mixed and bounded by 0.9bp lower and 1.3bps higher. Swap spreads are tighter beyond the 2-year.
• Tomorrow the local calendar sees Trade Balance and International Investment data.