Futures Stronger, Narrow Range, Solid 2-Year Auction, Tokyo CPI Tomorrow

JGB futures sit in the middle of a relatively narrow range in Tokyo afternoon trade, +12 compared to the settlement levels.

• ICYMI, BoJ Governor Kazuo Ueda suggested it’s possible to start normalizing monetary policy if the BOJ becomes confident inflation will pick up next year. For now, underlying inflation remains below 2%, and the BOJ’s outlook is for price increases to slow toward the end of the year, Ueda said Wednesday. He didn’t specify whether he was talking about the fiscal year that ends next March. (See link)
• Cash JGBs are little changed across the curve beyond the 1-year zone (1.1bp cheaper) with the 10-year zone the best performer (1.0bp richer).
• The 2-year benchmark yield is 0.4bp lower on the day at -0.063%, after today’s supply takedown saw solid demand with the cover ratio jumping to its highest level observed at a 2-year auction since September with a reduced tail.
• The swap curve twist flattens, pivoting at the 7-year, with rates ranging from +0.5bp (2-year) to -1.3bp (30-year). Swap spreads are generally wider out to the 7-year and narrower beyond.
• The local calendar tomorrow sees the all-important Tokyo CPI data with BBG consensus expecting an uptick for the annual headline, core and core-core measures. Jobless rate is also due along with BoJ Rinban operations covering 3- to 25+ Year JGBs.