Hawkish BoJ Scenarios Fail To Materialise But Bond Markets Remain Under Pressure

Selling pressure on core FI markets has intensified, even as the BoJ disappointed those looking for signals that policy tightening might be on the horizon, with appetites for hawkish communique fuelled by last week's RTRS report noting that policymakers were debating how to begin messaging on an eventual (albeit by no means imminent) rate hike. Japan's central bank kept all main policy settings unchanged and although they tipped hat to rising price pressures, the language on growth outlook was fairly cautious, while there were no hints on any reversal from the current ultra-loose policy stance.

• JGB futures tumbled after the Tokyo lunch break, digesting the BoJ announcement delivered in the interim. The contract sits at 150.75, 8 ticks below previous settlement. Cash JGBs have also lost their earlier shine. The upcoming press conference with BoJ Gov Kuroda will shed more light on the central bank's discussions.
• T-Notes took a dive some time after the BoJ announcement in a sign that surrounding headlines have brought no reprieve. TYH2 last trades -0-20+ at 127-17. Eurodollars run 2.0-10.0 ticks lower through the reds. Cash U.S. Tsy yields sit 4.9-8.0bp higher across a flattened curve. The yield on 2-year Tsys has climbed further past the 1% mark, with 10-year & 30-year yields printing fresh cycle highs in the course of the session.
• The impetus from U.S. Tsys has spilled over into the ACGB space, with YM last -5.5 & XM -4.5. Cash ACGB curve runs higher and flatter. Bills trade 2-11 ticks lower through the reds.