Futures Sharply Lower After YCC Tweak Report, Tokyo CPI Beats

In post-Tokyo trade, JGB futures are sharply cheaper, closing -87 compared to settlement levels, after Nikkei's report elevated yield curve control discussion by the BOJ at tonight's policy meeting. "The Bank of Japan will discuss tweaking its yield curve control policy at a policy board meeting Friday to let long-term interest rates rise beyond its cap of 0.5% by a certain degree, Nikkei has learned, in what would be a shift toward a more flexible policy approach."

• JGB futures were also pressured overnight from US tsys, which cheapened after stronger than expected US data including much stronger than expected GDP and lower than projected jobless claims. However, PCE deflators were weaker than expected with the core rate down to an annualised 3.8%, the lowest increase in over two years.
• The ECB delivered the well-anticipated 25bps hike that takes the deposit rate to 3.75%, a record high for the Euro area. Forward guidance by the ECB was seen by the market as more dovish than expected. EGBs finished 1-5bp richer with the curve steeper.
• Tokyo CPI prints higher than expected with the headline CPI at 3.2% y/y versus 2.9% est. and 3.1% prior. Core and Core-Core measures print respectively 3.0% y/y and 4.0% y/y compared to consensus 2.9% and 3.7% and prior 3.2% and 3.8%. This should pressure JGBs in early Tokyo trade.