JGBS: Cheaper After BoJ Tamura’s Comments, 20Y Supply Due

At the Tokyo lunch break, JGB futures weaker, -24 compared to the settlement levels.

• Outside of the previously outlined PPI, BSI Sentiment & Investment Flows, the market has had comments from BoJ Tamura to digest. His remarks came across as more hawkish than those made by Nakagawa yesterday.
• BoJ's Tamura emphasised the need to raise short-term interest rates to around 1% by the latter half of the long-term forecast period through fiscal 2026 to achieve the 2% inflation target. He views the neutral rate at 1% and suggests adjusting rates based on the certainty of reaching the price goal.
• Tamura also expressed concern that the market's expectation for the BoJ to raise rates is too slow, which could further increase upward inflation risks.
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s post-CPI sell-off. The focus now turns to today's US PPI and Weekly Claims data.
• Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 20-year yield is 1.9bp higher at 1.691% ahead of today’s supply.
• The current auction offers an outright yield and a 10/20 yield curve that are around the same levels as August’s outing.
• Swap rates are 1-5bps higher, with the curve steeper.