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Richer Ahead Of US CPI Data & FOMC Policy Decision, BoJ Decision On Friday

JGBS
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JGB futures are holding richer and near session highs, +30 compared to settlement levels.

  • Today's BoJ Rinban operations saw negative spreads and mostly lower offer cover ratios. At the margin, this generated some slight support for the market in the Tokyo afternoon session.
  • Outside of the previously outlined PPI data, there hasn't been much in the way of domestic drivers to flag.
  • Looking ahead, we anticipate that the BoJ will maintain its policy rate on June 14. Nevertheless, we expect a generally hawkish tone at the meeting, indicating the possibility of additional policy tightening in subsequent meetings, possibly as soon as July.
  • The focus for the June meeting will likely be on the future pace of JGB purchases. It seems increasingly likely that the Policy Board will introduce new guidelines. (See MNI BoJ Preview here)
  • Cash US tsys are little changed in today’s Asia-Pac session ahead of today’s US CPI data and the FOMC policy decision.
  • Cash JGBs are richer, with yields flat to 3.2bps lower. The benchmark 10-year yield is 3.0bps lower at 0.997% versus the cycle high of 1.101%.
  • Swap rates are ~1bp lower. Swap spreads are wider.
  • Tomorrow, the local calendar will see Weekly International Investment Flow data and results of the Q2 BSI Large Company Survey. The MoF will also conduct a Liquidity Enhancement Auction for OTR 15.5-39-year JGBs.
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JGB futures are holding richer and near session highs, +30 compared to settlement levels.

  • Today's BoJ Rinban operations saw negative spreads and mostly lower offer cover ratios. At the margin, this generated some slight support for the market in the Tokyo afternoon session.
  • Outside of the previously outlined PPI data, there hasn't been much in the way of domestic drivers to flag.
  • Looking ahead, we anticipate that the BoJ will maintain its policy rate on June 14. Nevertheless, we expect a generally hawkish tone at the meeting, indicating the possibility of additional policy tightening in subsequent meetings, possibly as soon as July.
  • The focus for the June meeting will likely be on the future pace of JGB purchases. It seems increasingly likely that the Policy Board will introduce new guidelines. (See MNI BoJ Preview here)
  • Cash US tsys are little changed in today’s Asia-Pac session ahead of today’s US CPI data and the FOMC policy decision.
  • Cash JGBs are richer, with yields flat to 3.2bps lower. The benchmark 10-year yield is 3.0bps lower at 0.997% versus the cycle high of 1.101%.
  • Swap rates are ~1bp lower. Swap spreads are wider.
  • Tomorrow, the local calendar will see Weekly International Investment Flow data and results of the Q2 BSI Large Company Survey. The MoF will also conduct a Liquidity Enhancement Auction for OTR 15.5-39-year JGBs.