Futures Richer Overnight, BoJ To Lift Inflation Forecast Above 2%

In post-Tokyo trade, JGB futures are richer, closing +11 compared to settlement levels, after US tsys finished 4-13bps richer across the major benchmarks after US PPI printed softer than forecast (+0.1% m/m versus +0.2% est). However, initial jobless claims declined (237k versus 250k est).

• The 2-year yield declined another 12bp to 4.630% after richening 13bp on Wednesday. The 10-year rate finished 9bp lower at 3.76% following the previous day’s 11bp drop. These levels are the lowest since mid-to late June. The curve bull steepened to -86 bps from -89 bps previously.
• The move higher in tsys came alongside DXY printing below 100 for the first time since April 2022 amid heavy risk-on flows.
• Bloomberg reports that JGB futures are likely to resume a downward trajectory after a report the Bank of Japan will raise its inflation forecast above 2%. That threshold has been cited by Governor Ueda as a key marker for tweaking monetary policy. Given there is a policy meeting in two weeks, that’s plenty of time for traders to speculate on the shape of the JGB yield curve.
• Today the local calendar sees Industrial Production and Capacity Utilisation data for May along with BoJ Rinban operations covering 1-10-year and 25-Year+ JGBs.