Futures Off Session Lows After BOJ Unscheduled Bond Purchase

In Tokyo afternoon dealings, JGB futures remain weaker but off session cheaps, -20 compared to settlement levels, after the BOJ conducts an unscheduled bond purchase to buy Y300bn of 5-to-10-year and Y100bn of 3-5bn notes at market yields.

• There hasn’t been much in the way of domestic data drivers to flag today, outside of the previously outlined Jibun Bank Japan PMI Mfg data.
• Bloomberg reports that BofA believes the BOJ’s next step will probably be the removal of negative interest-rate policy and yield-curve control. BofA’s base case scenario is for the central bank to move at its January meeting. A change may come by April at the latest, they said. (See link)
• Cash JGBs are cheaper across benchmarks, with yields 0.5bp (1-year) to 3.3bps higher (30-year). The benchmark 10-year yield is 1.8bp higher at 0.966% versus the cycle high of 0.974% (set earlier today) and the BOJ’s YCC reference level of 1.0%.
• Swap rates are 2-4bp higher across the curve, with swap spreads wider, apart from the 30-40-year zone.
• Tomorrow, the local calendar sees Monetary Base and International Investment Flow data, along with 10-year supply.