Futures Gap Lower On Hawkish BoJ Summary Of Opinions

In Tokyo morning trade, JGB futures gapped sharply lower, -30 compared to settlement levels, after the release of a relatively hawkish BoJ Summary Of Opinions for the January policy meeting. The session low for JBH4 was 145.96, -48 versus settlement levels.

• BoJ board members continued to discuss prospects for ending the negative rate policy during their meeting last week, with some members indicating conditions that would allow that move are increasing. One member said current economic conditions offer a “golden opportunity” to end the world’s last negative rate by increasing rates in Japan for the first time since 2007. Another said the certainty of achieving a virtuous cycle linking wage gains to demand-led inflation is rising, according to a summary of opinions released Wednesday. (See Bloomberg link)
• Also, Industrial Production gained 1.8% in December, after falling the previous month, as output of machinery and chemicals expanded. Meanwhile, Retail Sales printed a weaker-than-expected annual rise of 2.1% versus expectations of +5.1% and +5.3% prior.
• Cash JGBs are cheaper, with the 10-year underperforming. The benchmark 10-year yield is 3.1% higher at 0.748% versus the Nov-Dec rally low of 0.555%.
• Swaps are also cheaper, with swap spreads mostly tighter.