Futures Pare Overnight Losses Despite CPI Beat, BOJ Policy Decision Due

In Tokyo morning trade, JGB futures have pared overnight losses, -9 compared to settlement levels, after the morning's data drop and ahead of the BOJ policy decision.

• Our analysis aligns with the prevailing consensus that is anticipating that the BOJ will maintain its existing policies in the upcoming announcement, including the short-term interest rate remaining at -0.1%. (See MNI’s BOJ Preview here)
• Japan's national August CPI was a touch firmer than expected. The headline printed at 3.2% y/y, versus 3.0% forecast (3.3% prior). The ex-fresh-food measure rose 3.1% y/y, versus 3.0% forecast and 3.1% prior. The core measure (ex-fresh-food and energy) was as expected at 4.3% y/y, which was also the prior outcome.
• Japan's weekly investment flow data showed offshore investors purchased Japan bonds, +¥439.4bn, up on the prior week's modest inflow. Local investors bought ¥885.5bn of offshore bonds, down from the prior week's sharp outflow.
• Jibun Bank manufacturing, services and composite preliminary PMIs all declined in September printing 48.6, 53.3 and 51.8 respectively versus 49.6, 54.3 and 52.6 prior.
• Cash JGBs are cheaper out to the 30-year zone, with the 7-year zone the underperformer (yield 1.5bps higher). The benchmark 10-year yield is 1.0bp higher at 0.753% versus a fresh post-YCC tweak high of 0.756% set today.
• Swap rates are slightly lower from the 2-year out to the 30-year. Swap spreads are tighter across maturities.