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Holding A Bear-Steepener Ahead OF BoJ Policy Decision

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At the Tokyo lunch break, JGB futures are holding weaker, -31 compared to settlement levels, ahead of the BoJ Policy Decision. We are now on BoJ watch with onshore bonds and futures closed for the lunchtime break.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined lower-than-expected Tokyo CPI.
  • (MNI) At today's meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%. This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal. (See MNI BoJ Preview here)
  • The cash JGB curve bear-steepened, with yields 1-3bps higher. The benchmark 10-year yield is 3.4bps higher at 0.933%, a fresh YTD yield high.
  • The swaps curve has twist-steepened, pivoting at the 40s, with rates -4bps to +3bps. Swap spreads are tighter out to the 30-year.
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At the Tokyo lunch break, JGB futures are holding weaker, -31 compared to settlement levels, ahead of the BoJ Policy Decision. We are now on BoJ watch with onshore bonds and futures closed for the lunchtime break.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined lower-than-expected Tokyo CPI.
  • (MNI) At today's meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%. This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal. (See MNI BoJ Preview here)
  • The cash JGB curve bear-steepened, with yields 1-3bps higher. The benchmark 10-year yield is 3.4bps higher at 0.933%, a fresh YTD yield high.
  • The swaps curve has twist-steepened, pivoting at the 40s, with rates -4bps to +3bps. Swap spreads are tighter out to the 30-year.