Futures Near Session Lows At Lunch, 10YY Not Far From The BOJ’s 1% Reference Rate

In the morning session, JGB futures have pushed to a new cycle low of 143.44 before paring to 143.50 at lunch, -23 compared to the settlement levels. The market still appears to be working through the implications of yesterday’s BOJ decision to dovishly tweak its YCC framework.

• The BOJ on Tuesday relaxed the upper limit of its range for the 10-year bond yield, citing economic uncertainty, but indicated that it does not want to see a surge in interest rates, with Governor Kazuo Ueda insisting that a rise much above 1% is unlikely.
• “The BOJ continues to conduct large-scale bond buying and the Bank will conduct fixed-rate bond-buying operations, if necessary,” Ueda told reporters.
• There hasn’t been much in the way of domestic drivers to flag today, outside of the previously outlined Jibun Bank Japan PMI Mfg data.
• Cash JGBs are cheaper across benchmarks, with yields 0.5bp to 4.4bps higher. The benchmark 10-year yield is 2.7bp higher at 0.974%, a new cycle high and just shy of BOJ’s new YCC reference level of 1.0%.
• Swap rates are 2-4bp higher across the curve, with swap spreads wider, apart from the 40-year.