Poor 2Y Supply Weighs Ahead Of BOJ Policy Decision Tomorrow

JGB futures are weaker and near session lows, -11 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, with the data calendar empty ahead of the BOJ policy decision tomorrow.
• As for the decision expected tomorrow, our analysis aligns with the prevailing consensus, which foresees the BOJ maintaining its existing policies in the upcoming announcement.
• Regarding the BOJ's YCC policy, most market participants do not foresee any changes this week, although many hesitate to completely rule out the possibility. See the MNI BOJ Preview here.
• Cash JGBs are at or near Tokyo session cheaps across the curve following poor demand metrics observed at today’s 2-year supply. It was notable that today’s cover ratio was the lowest for a 2-year auction since 2010. Yields are 0.3bp lower (40-year) to 1.5bps higher (20-year). The benchmark 10-year yield is 1.1bps higher at 0.892% versus the cycle high of 0.897% set today.
• The 2-year is 1.0bp higher at 0.103% versus Friday’s close of 0.093%.
• Swap rates are slightly higher across maturities. Swap spreads are mixed across the curve.
• Tomorrow, the local calendar sees Jobless Rate, Retail Sales, Dept. Store and Supermarket Sales and Industrial Production data, ahead of the BOJ Policy Decision.