Futures Look Through Global FI Bid Overnight, Reaction To BoJ Speculation Eyed

JGB futures failed to latch onto the bid in wider core global FI markets overnight, with cautious comments from an ECB hawk re: QT, a dovish MNI ECB sources piece, Fed rhetoric and an element of pre-U.S. CPI setup failing to impact the contract, which finished overnight trade +2.

• This lack of movement/impact of those factors will be weighed up against the latest round of press speculation re: The BoJ in early Tokyo dealing.
• To recap, the latest Yomiuri source report has suggested that the Bank will review the side-effects of its ultra-loose policy settings at next week's monetary policy meeting due to continued skew in market interest rates (we point to the kink in the JGB curve that we have outlined previously) even after the surprise tweak to YCC in December.
• This will continue to fan the flames re: the potential for another BoJ policy tweak, with Bank communication now changed and markets on alert for a wider review of the BoJ’s inflation targeting process in the coming months as BoJ Governor Kuroda’s term comes to an end (in lieu of source reports and government rhetoric on the matter).
• Also note that 10-Year yields continue to probe the upper boundary of the BoJ’s new YCC parameters, with the kink on the curve and YCC settings combination providing a natural point for market participants to challenge.
• BoP data and the latest round of BoJ Rinban operations (covering 1- to 3- and 5- to 25+-Year JGBs) headline the domestic docket today, but expect BoJ speculation to dominate.