Futures Holding Richer, BoJ Policy Decision Tomorrow, No Change Expected

In Tokyo afternoon dealing, JGB futures are holding richer and near session highs, +14 compared to the settlement levels, ahead of tomorrow’s BoJ Policy Decision.

• Our analysis aligns with the prevailing consensus, anticipating the BoJ to continue normalising its policy in 2024, though such adjustments are not anticipated at this week's meeting.
• The delay in exiting the Negative Interest Rate Policy (NIRP) is grounded in several considerations: an evaluation of the impact of the earthquake, conclusion of the shunto wage negotiations, no incentive to surprise the market and the need to transition from an explicit easing bias to a tightening bias. (See MNI’s BoJ Preview here)
• There hasn’t been much in the way of domestic drivers to flag today.
• Bloomberg reported that trading of Japanese government bonds was the most active last month in more than a decade as investors bet on interest rate hikes and the central bank sought to reduce its presence in the debt market. (See link)
• Cash JGBs are dealing mixed, with yield movement ranging from -1.6bps (7-year) to +2.3bps (30-year). The benchmark 10-year yield is 0.2bp lower at 0.666% versus the Nov-Dec rally low of 0.555%.
• The swaps curve is slightly richer. Swap spreads are mixed.