Move In U.S. Tsys Set To Give BoJ Some Breathing Room Ahead Of Decision

JGBs futures roughly followed the broader ebb and flow of U.S. Tsys during the overnight session, leaving the contract -3 at the close, ultimately rallying post-FOMC after initially showing lower, as markets digested Fed Chair Powell’s press conference and the dot plot.

• The latest BoJ decision headlines the domestic docket on Thursday (see our full preview here). No changes are expected when it comes to the Bank’s headline monetary policy settings, with the Bank set to shutter its COVID-related financing scheme for small businesses. Some look for a tweak to the Bank’s forward guidance, although we do not think such a move will be forthcoming this time out.
• Note that 10-Year JGBs failed to trade for a second consecutive day on Wednesday, with the measure up against the upper limit of the Bank’s YCC tolerance band. The post Fed flattening of the U.S. Tsy curve may aid the BoJ on this front and provide some support for the longer end of the JGB curve in early Tokyo trade.