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Futures Hold Tight Range, Cash JGBs Firm Ahead Of BoJ

JGBS

JGB futures have held a narrow range thus far, with all eyes on the BoJ, which is due to conclude its two-day monetary policy meeting. The Policy Board is expected to keep the notoriously ultra-loose settings unchanged, but the Outlook Report and press conference with Gov Kuroda will be closely watched (see our full preview here).

  • Benchmark futures last trade at 148.76, up 10 ticks from the previous settlement. The contract re-opened on a slightly firmer footing, taking its cue from the overnight surge in U.S. Tsys, but has now unwound those modest gains.
  • Cash JGBs have richened across the curve. The yield on 10-Year JGBs remains close to the 0.25% ceiling imposed by the BoJ as part of its YCC framework. Japan 10-Year swap rates have extended this week's pullback from multi-year highs, further reducing their premium over 10-Year JGB yield.
  • Tokyo core CPI inflation, a bellwether of nationwide price pressures, accelerated to +3.4% Y/Y this month from +2.8% prior, topping the +3.2% consensus forecast. While prices are growing faster than the BoJ's +2.0% target, the central bank has insisted that they are not driven by reignited wage growth.
  • The jobless rate ticked higher to 2.6% in September against expectations of an unchanged reading of 2.5%, while the jobs/applicant ratio edged higher.

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