No Recovery From BoJ Nakagawa-Induced Sell-Off

JGB futures are weaker and near session lows, -25 compared to settlement levels after BoJ Board Member Nakagawa indicated the timing for an interest rate increase is coming closer. He noted progress toward achieving the bank’s price target. “Japan’s economy and inflation are steadily making progress toward meeting the stable 2% inflation target,” Nakagawa said in a speech to local business leaders in Shimane, western Japan. (See Bloomberg link)

• Outside the above domestic driver, Japan's January wages data was stronger than expected, as previously outlined, and 30-year supply saw poor demand metrics. The low price failed to meet dealer expectations, the cover ratio declined to 2.934x from 3.181x in February and the auction tail widened.
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s post-Powell bull-flattening. Later today sees Weekly Claims, Unit Labor Cost, and day two of Chair Powell's testimony.
• The cash JGB curve bear-steepened, with yields flat to 3bps higher. The benchmark 10-year yield is 1.5bps higher at 0.732% versus the February high of 0.772%.
• The swaps curve has also bear-steepened, with rates 1-2bps higher. Swap spreads are wider apart from the 7-year and 20-year.
• Tomorrow, the local calendar sees Household Spending, BoP Current Account, Bank Lending and Leading & Coincident Indices data.
• Tomorrow will also see BoJ Rinban operations covering 1- to 10-year JGBs.