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Futures Holding At Overnight Closing Lows After April CPI


JGB futures are holding near overnight closing levels, -25 versus settlement levels, after initially ticking lower in early Tokyo trade after core CPI in April rises at its fastest annual pace since the 1980s.

  • The BOJ has various factors to consider, but the recent CPI data is likely to represent a small step towards the eventual end of the negative rate policy. The upcoming Tokyo CPI figures may further strengthen this message, making the June central bank meeting an event to watch.
  • BoJ Governor Ueda has expressed his expectation that inflation will dip below the bank's 2% target in the latter part of the current fiscal year, which began in April.
  • BoJ Governor Ueda is scheduled to appear in parliament from 0140 BST / 0940 JST.
  • In line with the weakening in JGB futures, cash JGBs have opened cheaper across the curve, apart from the 1-2-year zone which is flat to 0.3bp richer. Yields beyond the 2-year zone are 0.6-2.3bp higher with the 7-year zone leading. The benchmark 10-year yield is 2.3bp higher at 0.405%.
  • Swap rates are higher across the curve ranging from +0.2bp to +1.5bp. Swap spreads are wider out to the 5-year zone and generally tighter beyond.
  • The MoF plans to sell Y6.3bn of 3-month bills as well as sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction.

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