Futures Weaker, Long-Dated US Tsys Extend Post-FOMC Sell-Off, CPI & BOJ Policy Decision Today

In post-Tokyo trade, JGB futures are weaker, closing -16 compared to settlement levels, ahead of the BOJ policy decision today. US tsys finished 3bps richer to 13bps cheaper across the major benchmarks. The curve twist steepened pivoting on 5s. Spillover from gilts, as the BOE followed the Fed's lead with a hawkish hold in rates, saw US tsys pressured to session lows. The move gained momentum after jobless claims unexpectedly fell (201k versus 225k est. and 220k prior).

• Our analysis aligns with the prevailing consensus that is anticipating that the BOJ will maintain its existing policies in the upcoming announcement, including the short-term interest rate remaining at -0.1%.
• However, groundwork appears to be underway for eventually abandoning the last negative policy rate among major economies. Governor Ueda's post-meeting press conference will likely be closely scrutinised. He is expected to field questions seeking clarification regarding his comments from the newspaper interview nine days ago, specifically concerning the potential ending of the negative interest rate policy, possibly as early as year-end. (See MNI’s BOJ Preview here)
• National CPI for August prints 3.2% y/y versus 3.0% est. and 3.3% prior. The core measure also prints higher than expected at 3.1% y/y versus an estimate of 3.0% and 3.1% prior. The core-core measure prints in line with the estimate and the prior at 4.3%.