Futures Extend Friday’s Overnight Weakness, Light Local Calendar

In Tokyo morning trade, JGB futures have extended overnight weakness on Friday to -32 compared to settlement levels.

• Today, the local calendar is relatively light, with Jibun Bank PMIs as the only release. The market’s focus for this week, however, is the BoJ Policy Decision on Friday.
• No policy adjustment is anticipated at the two-day meeting ending on April 26, following last month's decision to raise rates for the first time since 2007.
• However, a growing number of economists foresee the possibility of the BoJ implementing another rate hike in October, with many highlighting July as a potential earlier timeframe. The prospect of a weaker yen is cited among the factors that could accelerate this timeline.
• Nonetheless, it is anticipated that the BoJ will revise its inflation forecast for the current fiscal year to 2.6% and project a 2% price growth for the fiscal year commencing in April 2026. This adjustment reflects optimism regarding wage trends.
• Cash JGBs are cheaper out to the 20-year, with the 7- and 20-year leading (yields +1.5bps). The benchmark 10-year yield is 0.9bp higher at 0.860% versus the YTD high of 0.891%.
• Swaps are cheaper, apart from the 3-7-year zone, which is little changed. 20-40-year rates are 2-4bps higher. Swap spreads are wider beyond the 10-year.