Futures Sharply Weaker After A Speech By BoJ Adachi

At the Tokyo lunch break, JGB futures are significantly weaker, hitting session lows at -36 compared to settlement levels. The overnight weakness, influenced by US tsys, was exacerbated by a speech by BoJ Board member Seiji Adachi in Kumamoto. Adachi reiterated the need for caution in any further policy changes, emphasising that the central bank's decision to end easing measures does not signify a shift towards monetary tightening. Nevertheless, he did state that:

• “If we focus too much on downside risks, inflation may accelerate and might force us to tighten monetary rapidly as a result” and
• “By fixing interest rates at current zero levels until inflation is durably at our price target, we might be forced to hike rates rapidly later and therefore risk hurting the economy.”
• Cash US tsys are dealing flat to 1bp cheaper in today’s Asia-Pac session after yesterday’s bear-steepening.
• The cash JGB curve has bear-steepened, with yields flat to 4bps higher. The benchmark 10-year yield is 4.3bps higher at 1.073% a fresh cycle high.
• The swaps curve has also bear-steepened, with rates 1-4bps higher. Swap spreads are mixed.
• Consumer Confidence for May is out later.