Futures Lower Overnight, BoJ Action Eyed

JGB futures shed 23 ticks in overnight trade, finishing off of worst levels, with the pressure in U.S. Tsys leading the way lower. Still, the contract failed to get anywhere near challenging the cycle lows, with participants on the lookout for BoJ fixed rate operations as 10-Year JGB yields flirt with the 0.25% level, given the BoJ’s recent affirmative action & rhetoric when it comes to reinforcing the upper end of its permitted -/+0.25% trading band.

• A quick reminder that the latest insight piece from our policy team highlighted their understanding that “Bank of Japan officials are concerned that the longer the yen remains under pressure and energy prices high, the less likely service sector firms will be to invest as the economy re-opens from the pandemic.”
• On the fiscal front, support for low income families with children has been flagged by local media, although this is only one pillar of the fiscal support package that is being drawn up at present.
• Looking to the domestic docket, BoJ Rinban operations covering 1- to 25-Year JGBs headlines matters today. We will also get monthly trade balance data.