Richer After The BoJ Policy Decision But Initial Gains Have Been Pared

In post-BoJ Decision dealings, JGB futures are higher at 143.95, +49 compared to the settlement levels, but well below the session high (JBU4 at 144.26) set early in the afternoon session following today’s BoJ Policy Decision.

• The BoJ kept its benchmark interest rate unchanged, maintaining it in a range between 0 to 0.1%, in a unanimous vote. The bank also announced plans to reduce the amount of its bond purchases and will specify the details at the next policy meeting. It will decide on JGB purchase amounts for the next 1-2 years
• (MNI) The BoJ board largely maintained its assessment of the overall economy and major economic components, including the assessment of inflation expectations. “Underlying CPI inflation is expected to increase gradually since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify." (See link)
• The cash JGB curve has extended its bull-flattening in post-decision dealings, with yields 1-6bps lower. The benchmark 10-year yield is 4.6bps lower at 0.929% versus the cycle high of 1.101%.
• Swaps are richer across maturities, with rates 2-5bps lower. Swap spreads are mostly wider.
• On Monday, the local calendar will see Core Machine Orders, ahead of BoJ Rinban Operations covering 1-25-year JGBs on Tuesday.