Off Best Levels, New BoJ Board Members Set To Speak

JGBs operate shy of best levels, after JGB futures failed to force a break of the overnight session high.

• Local headline flow has been light thus far, leaving wider core FI dynamics since Friday’s Tokyo close and the unwind of an early uptick in crude futures at the fore.
• Futures sit +45 vs. Friday’s settlement, ~20 off their Tokyo peak. Cash JGBs run little changed to ~3.5bp richer on the day, after playing catch up to Friday’s richening in wider core global FI markets, with swaps lagging across the curve, resulting in a widening of swap spreads.
• The details of BoJ Rinban operations covering 1- to 25-Year JGBs may have provided some pressure on the 10- to 25-Year zone of the curve, given the uptick in offer/cover in that bucket.
• 10-Year JGB yields briefly showed below 0.18%, hitting the lowest level observed since March in the process, given the BoJ’s YCC parameters a little more breathing room.
• The BoJ has flagged an impending address from new board members Takata & Tamura (17:00 Tokyo/09:00 London). As noted by our policy team in their most recent insight piece, Takata, most recently an economist at brokerage Okasan Securities, has previously voiced concern over side-effects of powerful monetary easing, although he is expected to side with current policy settings at the upcoming BoJ decisions. Meanwhile, Tamura, most recently a senior adviser at Sumitomo Mitsui Banking Corp, has reportedly voiced concern on the BoJ’s bond market operations distorting markets, but is also likely to support Kuroda when it comes to maintaining easy policy through the end of the Governor’s term.