Post-BOJ Decision Spike In Futures Unwound

JGB futures spiked to a fresh Tokyo session high in the early rounds of the afternoon session after the arguably dovish hold by the BOJ. However, those gains were unwound. JBZ3 is currently holding an uptick, +2 compared to settlement levels.

• The BOJ kept all the policy parameters unchanged. The policy rate stays at -0.1%, 10yr yield target around 0%, with a -/+0.50% band on this and a firm cap at 1.0%, which was introduced at the last policy meeting in July. Forward guidance was also unchanged, with the central bank maintaining its easing stance until the 2% inflation target is achieved in a stable manner. It will also not hesitate to take additional easing measures if necessary.
• Focus now shifts to Governor Ueda's press conference, (1530 Tokyo time, 0730 BST), particularly in light of his recent media interview, which came across as hawkish, but the ruling party pushed back on this notion (see this link for more details).
• The cash JGB curve has unwound the twist flattening seen early in the afternoon session to be slightly cheaper across the curve. The benchmark 10-year yield is 0.2bp higher at 0.745% versus the fresh post-YCC tweak high of 0.756% seen earlier in the session.
• Swap rates are lower out to the 30-year, with pricing 0.2bp to 1.5bps lower. Swap spreads are tighter across maturities.
• Next week the local calendar sees Dept Sales on Monday and PPI Services on Tuesday. BOJ Minutes for the July Meeting, Leading and Coincident Indices and Machine Orders are on Wednesday. The MOF plans to sell Y700bn of 40-year JGBS on Tuesday.