Pressured By BoJ Speculation

JGB futures have traded heavily on the aforementioned Kyodo source piece which pointed to the potential for a tweak to the BoJ-government accord shortly after Governor Kuroda’s departure. That leaves the contract -17, more than reversing its overnight uptick. Meanwhile, wider cash JGB trade sees the major benchmarks running little changed to 1.5bp cheaper, with 5s leading the weakness and 10s capped by the BoJ’s YCC settings. Swap spreads are wider across much of the curve, pointing to payside swap flow-induced pressure for JGBs.

• In lieu of the Kyodo piece, J.P.Morgan have noted that “it is still unclear to what extent the actual revision of the accord will be made, and whether it would lead to a change in monetary policy. However, recently rising discussions on policy revisions and this media report suggest that Japan’s monetary policy normalization could proceed faster than expected, in a way that is also supported by political pressure.”
• Reaction to the story will continue to dominate in the Tokyo session, with BoJ fixed rate and Rinban operations the only points of note on the domestic docket.