Futures Reverse Overnight Gains On A Bank Report That NIRP Exit In Two Weeks

In Tokyo morning trade, JGB futures are holding in negative territory, -16 compared to settlement levels, after more than reversing overnight gains sparked by a solid rally in US tsys.

• The catalyst for the swing cheaper appears to have been a report that Japan’s biggest bank sees a BoJ exit from negative rates in two weeks. Mitsubishi UFJ Financial Group Inc.’s view is much more definitive than the swap market, which rates the chances of BoJ Governor Kazuo Ueda changing policy this month at about 50%. When he does change course, it will have major implications for both the 1,096 trillion yen government bond market and the nation’s currency. (See Bloomberg link)
• The local data calendar is empty today, with Jan labor cash earnings in focus tomorrow.
• Cash JGBs are dealing mixed, with the belly of the curve underperforming (7-10-year yields are 1bp higher). The 30-40-year zone is 0.1bp to 0.3bp richer. The benchmark 10-year yield is at 0.718% versus the Nov-Dec rally low of 0.555% and the February high of 0.772%.
• Swaps are slightly cheaper out to the 10-year and slightly richer beyond. Swap spreads are mixed.