IMF Advises BoJ To Consider Exit, Mixed Results For 5Y Supply, Holiday On Monday

JGB futures are weaker and at Tokyo session lows, -29 compared to settlement levels, after a lacklustre 5-year JGB auction.

• (BBG) This morning BoJ Governor Ueda said in Parliament that financial conditions in Japan will remain easy for the time being even after the BoJ puts an end to the world’s last negative rate regime. (See link ICYMI)
• (MNI) BoJ officials believe recent weak domestic demand data will not impede the Board’s desire to remove negative interest rates over the coming months as the economy will sustain the recovery, MNI understands.
• (BBG) The BoJ should plan an exit from its unprecedented monetary easing program now and raise interest rates gradually thereafter, with the return of sustained inflation, according to the IMF. (See link)
• Cash JGBs are cheaper out to the 30-year, with yields 1-3bps higher. The benchmark 10-year yield is 1.8bp higher at 0.723% versus the February low of 0.665% and the Nov-Dec rally low of 0.555%.
• The 5-year yield is 1.1bp higher on the day at 0.323% after today's supply. Overall, today’s auction is likely to be seen as disappointing after solid demand metrics seen at February’s 10- and 30-year JGB supply.
• The swaps curve has bear-steepened slightly, with rates 1-2bps higher. Swap spreads are tighter out to the 30-year.
• The local calendar is closed on Monday in observance of the National Foundation Day holiday.