JGBs Lead Core FI Lower On Talk Of BoJ Considering Rate Hikes Amid Global Tightening

The growing expectation of an earlier/more aggressive policy tightening from the Fed and many of its peers across the globe applied pressure to core FI space, after Thursday saw several voices join the choir of hawkish Fed members. An article suggesting that the BoJ might hike rates before meeting inflation target played into this narrative. So did the BoK's decision to hike their policy rate by 25bp (a non-negligible minority of analysts expected them to stand pat) to the pre-pandemic level of 1.25%, while signalling that they see inflation above mid-2% "for a considerable time."

• T-Notes went offered and extended their pullback from Thursday's high of 128-27 before stabilising in the later part of the Asia-Pac session. TYH2 last changes hands -0-03+ at 128-19+ after bottoming out at 128-17+. Cash U.S. Tsy yields have crept higher, they last sit 1.4-2.1bp higher, as the belly underperforms. Eurodollar futures trade unch. to -3.5 ticks through the reds. Fed's Williams will address the Council on Foreign Relations today, while key data releases include industrial output, retail sales & flash U. of Mich Sentiment.
• Reuters circulated a widely cited source report which added to the general hawkish central bank narrative by noting that BoJ "policymakers are debating how soon they can start telegraphing an eventual interest rate hike, which could come even before inflation hits the bank's 2% target," albeit not imminently. The report knocked JGBs on their head, with futures losing ground in early trade. The contract has edged away from lows after the Tokyo lunch break and now trades at 150.79, 27 ticks shy of last settlement. Cash JGB yields sit higher across the curve, the belly underperforms. The yield on 5-Year Note showed at its highest level since the BoJ adopted their negative interest rate policy in Jan 2016. On the supply front, the lowest bid at today's 20-Year JGB auction topped dealer expectations (which was 90.300 per the BBG dealer poll), which may have provided some incremental relief to the space in the Tokyo afternoon.
• Aussie bonds were driven by offshore impetus, tracking moves in U.S. Tsys & JGBs. Futures have just edged away from session lows but remain below neutral levels (YM -2.5 & XM +0.5). Cash ACGB curve twist flattened a tad, with yields last seen +3.3bp to -1.3bp. Bills run 1-3 ticks lower through the reds. Little to write home about the local headline flow, with ACGBs unfazed by today's offering of ACGB 0.25% 21 Nov '25 and the AOFM's weekly issuance slate.