JGB Futures Rip Higher Ahead Of BoJ, Tsys Lose Allure, Firm Auction Gives ACGBs Some Reprieve

Buying impetus has evaporated from U.S. Tsy space, with e-mini futures trading marginally in the green following Thursday's rout on Wall Street. Focus is on the BoJ's monetary policy decision after a week or so of wrestling between market participants and the central bank trying to enforce its yield target via aggressive debt purchases.

• JGB futures have been soaring, taking another leg higher as the BoJ conducted its daily fixed-rate bond purchase operations without any special announcements, even as 10-Year yield pushed further beyond the ceiling of the central bank's tolerance band. Policymakers are still in their meeting, with the outcome expected at any point after roughly 3:30 BST (based on previous announcements). JBU2 trade at 147.56, up 35 ticks vs. previous settlement and at/near session highs. Cash yields generally sit a tad lower across the curve, albeit 10s underperform. We have fleshed out the context of today's monetary policy decision in earlier bullets/preview, but it is worth noting that Japan FinMin Suzuki has just said that he hopes the BoJ will continue to work towards its inflation target, considering economic, financial and price conditions.
• T-Notes have gone offered, extending their move away from Thursday's high of 116-21. TYU2 last deals +0-09+ at 116-03+, printing fresh session lows. Eurodollars run unch. to +3.5 ticks through the reds. The yield curve has bear flattened in cash Tokyo trade, with yields last sitting 5.1-6.9bp higher. Fed Chair Powell will speak at the Dollar Conference today, local data highlights are limited to industrial output.
• Cash ACGBs softened from the off, defying the impact of overnight rally in U.S. Tsys. The curve runs steeper, yields trade 7.7-13.0bp higher. Futures have also come under pressure, with YM last -7.5 & XM -9.5, while bills trade 5-11 ticks lower through the reds. That said, a strong auction for A$1.0bn of ACGB May '32 appeared to provide some reprieve to the space, as one successful bidder took the whole amount on offer, reducing the price tail to zero. Based on our quick calculations, the last time when a single buyer snapped all of ACGBs on offer was in 2020, according to data from the AOFM. Excluding two 2020 sales, when single buyers managed to purchase A$2.0bn of auctioned bonds, today's was the largest amount bought by a lone bidder on record.