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JGBS: Futures Sharply Cheaper Overnight After FOMC, BoJ Decision Today

JGBS
BulletAPACFixed Income BulletsJapanMarkets

In post-Tokyo trade, JGB futures are sharply weaker, 43 compared to settlement levels, after US tsys finished the NY session 9-14bps cheaper. 

  • The Federal Reserve reduced interest rates by 25bps as expected. Still, it lowered the number of cuts needed next year to just two from four at the September meeting as inflation projections were significantly higher.  
  • As Chair Powell put it in the press conference, the FOMC is “in a new phase in the process” of easing policy, and “from this point forward, it's appropriate to move cautiously and look for progress on inflation.” (See MNI FOMC Review here)
  • The focus now turns to today’s BoJ policy decision, with the broad consensus expecting no change to policy settings.
  • Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
  • In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes. (See MNI BoJ Preview here)
  • Today, the local calendar will also see Weekly International Flow and Tokyo Condominiums For Sale data.
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In post-Tokyo trade, JGB futures are sharply weaker, 43 compared to settlement levels, after US tsys finished the NY session 9-14bps cheaper. 

  • The Federal Reserve reduced interest rates by 25bps as expected. Still, it lowered the number of cuts needed next year to just two from four at the September meeting as inflation projections were significantly higher.  
  • As Chair Powell put it in the press conference, the FOMC is “in a new phase in the process” of easing policy, and “from this point forward, it's appropriate to move cautiously and look for progress on inflation.” (See MNI FOMC Review here)
  • The focus now turns to today’s BoJ policy decision, with the broad consensus expecting no change to policy settings.
  • Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
  • In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes. (See MNI BoJ Preview here)
  • Today, the local calendar will also see Weekly International Flow and Tokyo Condominiums For Sale data.