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Futures Sharply Higher With US Tsys Following Dovish Fedspeak, BOJ Rinban Operations Today

JGBS

In post-Tokyo trade, JGB futures are sharply higher, closing +28 compared to settlement levels, after US tsys rallied 3-12bps, led by the short end. The driving force was Governor Waller leaning dovish by touting potential cut timings. In the Q&A, Waller suggested that if inflation continues to cool for maybe three to five months, the Fed could lower the policy rate.

  • Fed Fund futures priced an additional 10bps of easing for next year, taking it to a cumulative 100bps.
  • The 10-year fell 7bps to 4.32%, not seen since September, despite the cheapening impulse from the largest tail (2.1bps) for a 7Y tsy auction since Nov 2022.
  • Later today the US calendar sees the second Q3 GDP release including core PCE before Fedspeak from Cleveland Fed’s Mester (’24 voter) on financial stability and the Fed’s Beige Book.
  • Today, the local calendar is empty, apart from BOJ board member Adachi speaking in Ehime at 10:30 Tokyo time (01:30 BST).
  • The BOJ Rinban operations covering 3- to 25-year JGBs are also scheduled for today.
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