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JGBS: Sharp Rally As Political Uncertainty Could Delay Tightening

JGBS
BulletAPACFixed Income BulletsJapanMarkets

JGB futures are sharply stronger and near session highs, +31 compared to settlement levels, as domestic political uncertainty shifted back to centre stage.

  •  Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity. 
  • (MNI) The potential political reaction to rate hikes is making senior BOJ officials tend towards normalising policy more slowly, despite data showing it is moving towards achieving its inflation target, MNI understands.
  • The Bank’s concerns over politics, and also over how markets might react to higher rates, means that an increase to the 0.25% policy rate at the Dec 18-19 meeting will be unlikely unless the yen weakens to JPY160 against the dollar.
  • Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today. Fed Powell speaks at a policy discussion.
  • Cash JGBs are flat to 3bps richer across benchmarks, with a steepening bias. The benchmark 10-year yield is 3bps lower at 1.051%.
  • The swaps curve has twist-steepened, with rates 3bps lower to 1bp higher. 
  • Tomorrow, the local calendar will see International Investment flows alongside 30-year supply. BOJ Board Nakamura will give a speech in Hiroshima.
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JGB futures are sharply stronger and near session highs, +31 compared to settlement levels, as domestic political uncertainty shifted back to centre stage.

  •  Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity. 
  • (MNI) The potential political reaction to rate hikes is making senior BOJ officials tend towards normalising policy more slowly, despite data showing it is moving towards achieving its inflation target, MNI understands.
  • The Bank’s concerns over politics, and also over how markets might react to higher rates, means that an increase to the 0.25% policy rate at the Dec 18-19 meeting will be unlikely unless the yen weakens to JPY160 against the dollar.
  • Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today. Fed Powell speaks at a policy discussion.
  • Cash JGBs are flat to 3bps richer across benchmarks, with a steepening bias. The benchmark 10-year yield is 3bps lower at 1.051%.
  • The swaps curve has twist-steepened, with rates 3bps lower to 1bp higher. 
  • Tomorrow, the local calendar will see International Investment flows alongside 30-year supply. BOJ Board Nakamura will give a speech in Hiroshima.