Futures Pare Losses Ahead Of The BOJ Decision

At the Tokyo lunch break, JGB futures have slightly pared the morning's losses to be 143.86, -38 compared to the settlement levels. JBZ3 hit a session low of 143.57 as the market digested Nikkei headlines that posited the BOJ will consider tweaking the yield curve control (YCC) framework at today’s policy meeting.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined labour market, retail sales and IP data.
• A reminder with JGB futures closed for the lunch time break we are getting into the BoJ release window time period. Print times for the decision have been somewhat varied in recent months since Ueda took over. Our sense the longer it takes for the decision to be announced the more the market may speculate some type of policy shift YCC tweak may be announced.
• The cash JGB curve has experienced a bearish steepening, resulting in yields increasing by 1.5 to 4.5bps. Notably, the benchmark 10-year yield has surged to 0.963%, a new cycle high earlier in the session. At lunch it is 4.2bps higher at 0.936%.
• The swaps curve has bull-flattened, with rates 0.6bp to 5.6bps lower. Swap spreads sharply tighter across maturities.