Futures Weaker, BoJ Tamura Comments On Hitting 2% Goal

JGB futures have weakened in the Tokyo morning session to be -10 compared to settlement levels.

• With the data calendar empty so far today, the local market’s focus has been comments from BoJ Board Member Naoki Tamura. He stated that the achievement of stable and sustainable 2% inflation is finally and clearly within sight. It’s appropriate to stick with an ultra-easy policy for now because uncertainties remain about hitting that goal. However, he is hopeful wage gains will continue at a fast pace and sees the economy moving closer to a positive cycle of wage growth feeding into inflation. (See link)
• US tsys in Asia-Pac trade are also potentially weighing on JGBs too.
• The cash JGB curve has twist flattened, pivoting at the 10s, with rates 0.9bp higher (2-year) to 0.5bp lower (10-year). The benchmark 10-year yield is at 0.648%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• This morning’s BoJ Rinban operations saw higher and flat to positive spreads but mixed results for the cover ratios. The 3-5-year and 10-25-year buckets saw lower offer cover ratios, but the 5-10-year and 25-year+ buckets saw higher ratios. On balance, the operations suggest slight pressure, particularly for the 5-10 bucket and longer-dated JGBs, in the early rounds of the Tokyo afternoon session.
• The swaps curve has slightly bear steepened, with rates 0.1-0.6bp higher. Swap spreads are mixed.