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Futures Sit Weaker At Lunch But Off Low Set On Forward Guidance Tweak News

JGBS

JGB futures sit mid-range at the lunch break, -26 versus settlement levels, after spiking lower on news from Nikkei that the BoJ was mulling a forward guidance tweak. Immediately after the news JBM3 hit a low of 147.42, -64 compared to settlement levels.

  • The sudden drop in JGB futures followed by a quick rebound could be attributed to the fact that the news shouldn’t be a meaningful surprise, assuming the forward guidance tweak removes the reference to COVID. No meaningful policy changes are expected today. There is no fixed time for the release, but it typically comes any time after the start of the equity lunch break in Tokyo (11:30 Tokyo/03:30 London).
  • There hasn’t been much in the way of other domestic drivers to flag, outside of the previously outlined activity and inflation data both surprising on the upside today.
  • Cash JGBs are cheaper across the curve out to the 30-year zone with yields 0.1 to +1.6bp. The 7-year zone is the weakest, owing to downward pressure on JGB futures. The 40-year zone is the strongest with yields 0.1bp lower. The benchmark 10-year yield is 0.3bp higher at 0.469%, below the BoJ's YCC limit of 0.50%.
  • Swaps curve bear steepens with swap spreads wider across the curve.
  • BoJ Governor Ueda is scheduled to hold a news conference after the policy meeting at 0730 BST.
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