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Holding Richer, Narrow Ranges Ahead Of BoJ Policy Decision

AUSSIE BONDS

In today's Sydney session, ACGBs (YM +3.4 & XM +3.2) hold richer after dealing in relatively narrow ranges. With the domestic calendar light, an extension of overnight gains has been held back by today’s ~2bps cheapening in cash US tsys in today’s Asia-Pac session.

  • The other event of note today is the BoJ’s Policy Decision. We anticipate the BoJ will leave its policy rate unchanged, in line with consensus. Accordingly, the market's focus is likely on whether there is any announcement regarding balance sheet policy and the future pace of JGB purchases.
  • While it is uncertain whether the BoJ will revise its JGB purchase directive today, it seems increasingly likely that the Policy Board will introduce new guidelines. The latest Reuters poll showed that 63% of economists predict the BoJ will decide to start reducing bond buying at the June meeting, up from 41% in May. (See MNI BoJ Preview here)
  • Cash ACGBs are 3-4bps richer, with the AU-US 10-year yield differential at -10bps.
  • Swap rates are 3-4bps lower.
  • The bills strip has bull-flattened, with +1 to +6.
  • RBA-dated OIS pricing is 3-6bps softer for 2025 meetings. A cumulative 12bps of easing is priced by year-end.
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In today's Sydney session, ACGBs (YM +3.4 & XM +3.2) hold richer after dealing in relatively narrow ranges. With the domestic calendar light, an extension of overnight gains has been held back by today’s ~2bps cheapening in cash US tsys in today’s Asia-Pac session.

  • The other event of note today is the BoJ’s Policy Decision. We anticipate the BoJ will leave its policy rate unchanged, in line with consensus. Accordingly, the market's focus is likely on whether there is any announcement regarding balance sheet policy and the future pace of JGB purchases.
  • While it is uncertain whether the BoJ will revise its JGB purchase directive today, it seems increasingly likely that the Policy Board will introduce new guidelines. The latest Reuters poll showed that 63% of economists predict the BoJ will decide to start reducing bond buying at the June meeting, up from 41% in May. (See MNI BoJ Preview here)
  • Cash ACGBs are 3-4bps richer, with the AU-US 10-year yield differential at -10bps.
  • Swap rates are 3-4bps lower.
  • The bills strip has bull-flattened, with +1 to +6.
  • RBA-dated OIS pricing is 3-6bps softer for 2025 meetings. A cumulative 12bps of easing is priced by year-end.