Futures Supported Post-FOMC, Tokyo Feedthrough Eyed

JGB futures shunted higher in the latter rounds of overnight trading, owing to spill over from the latest FOMC decision. The latest post-FOMC communique saw a more non-comital tone re: the prospect of further rate hikes, while Fed Chair Powell noted that tightening of financial conditions via lending standards channels could provide a substitute for monetary tightening, although he pushed back against the idea of rate cuts later in ’23. That left the contract +40 at the close of overnight trade, 10 ticks or so shy of best levels after bulls threatened to close Wednesday’s post-holiday opening gap lower.

• Late on Wednesday we saw Japan's government lower its outlook for industrial production and corporate profits, while it kept its assessment of the domestic and overseas economies unchanged.
• Post-Fed feedthrough will be in the driving seat early today, with a lack of meaningful domestic headline flow observed since Wednesday’s Tokyo close, while a liquidity enhancement auction for off-the-run 5- to 15.5-Year JGBs provides the highlight of the local docket on Thursday.