Post-BoJ Fallout Eyed

JGB futures oscillated above Tokyo closing levels in overnight dealing, failing to get anywhere near a challenge of post-BoJ lows, finishing the after-hours sesison +31.

• Note that BoJ Governor Kuroda pushed back against the idea that Tuesday’s YCC tweak represented policy tightening (despite deploying numerous rounds of comments to the contrary over recent months), highlighting a focus on the need to improve the functionality of the JGB market.
• The 10-Year kink still remains evident on the JGB curve, although it is less pronounced (see previous bullet). This creates a natural desire to test the BoJ’s will and would have played into the BoJ’s decision to upsize Rinban operations in Q123.
• Final machine tool orders data headlines the domestic docket today. Although post-BoJ fallout will continue to dominate, with participants on the lookout for any unscheduled BoJ Rinban and fixed rate operations, with the Bank potentially looking to fortify its new YCC settings (although the impact that would have re: reductions in liquidity would further hamper market functioning).