Futures Spike To Highest Level Since Late March After BoJ Decision

Following the BoJ’s monetary policy decision, JGB futures experienced a sudden surge, erasing the prior downtrend and climbing to +36 versus settlement levels. The JBM3 reached a peak of 148.49, marking the highest point since late March.

• The BoJ announced today that it would maintain its target yield for the 10-year bond at approximately 0% and keep the policy balance rate at -0.1%. As widely anticipated, the bank removed references to COVID-19 from its forward guidance. Furthermore, the BoJ called for a comprehensive review of its longer-term policies.
• Despite the significant increase in inflation forecasts for FY23 and FY24, the BoJ saw the price risks skewed to the downside for FY25, given the high levels of economic uncertainty. The bank expects the pace of growth to slow down towards the end of the projection period, and as such, it will patiently continue with monetary easing.
• Cash JGBs have richened across the curve after the BoJ decision with yields flat to 5.4bp lower with the 20-year zone and beyond the strongest performers. The benchmark 10-year yield is 3.9bp lower at 0.427%, well below the BoJ's YCC limit of 0.50%.
• The swaps curve bull flattened after the BoJ decision with swap spreads wider beyond the 3-year zone.
• BoJ Governor Ueda is scheduled to hold a news conference after the policy meeting at 0730 BST.