Futures Sharply Cheaper After BoJ Ueda’s Hawkish Shift At Yesterday’s Presser

In post-Tokyo trade, JGB futures are sharply cheaper, closing -45 compared to settlement levels, after BoJ Governor Ueda’s remarks suggested that the BoJ is a step closer to ending the negative interest rate, possibly at its April meeting.

• As largely expected, the BoJ delivered yesterday no changes in policy, forward guidance or its explicit easing bias. The upper bound reference on long-term yields was also maintained at 1%.
• A clear timetable to exit zero rates was however not offered by Governor Ueda, stating that “the central bank probably wants to see the results of wage increases to assess if this is a sustainable trend and therefore it probably won’t rush to take action.”
• US tsys, which finished with a twist-steepening of the curve, also likely weighed on JGB futures overnight. US yields were 2bps lower to 4bps higher after a NY session that lacked catalysts to drive the market.
• US bond supply was heavy with a $61bn 2-year auction and another hefty corporate slate. The 2-year yield declined 2bps after a solid auction. The 2-year was further supported by comments from former St Louis Fed’s Bullard, who saw prospects for the Fed cutting in 1H24 before inflation returns to the 2% target.
• Today, the local calendar sees Trade Balance and Jibun Bank PMIs (P) data, along with BoJ Rinban Operations covering 1-25-year JGBs.