Selling Pressure Hits JGBs, 5-Year Yield Prints Best Levels Since Jan 2016

Cash JGBs have softened in early Tokyo trade, with the belly of the curve underperforming. The yield on 5-Year Notes has surged to the highest point since Jan 2016, when the BoJ launched their negative interest rate policy. JGB futures have turned their tail and JBH2 trades at 150.78, 28 ticks below last settlement & in close proximity to session lows.

• BoJ chatter is doing the rounds ahead of next week's policy meeting, with members expected to modestly raise their inflation forecast for FY2022. The driver of today's move might be a Reuters report, which suggested that the BoJ are debating how to begin messaging an eventual interest rate hike, which might come to fruition even before they meet the official inflation target.
• On the data front, Japan's PPI rose 8.5% Y/Y in December, slowing from November's revised reading of +9.2% and undershooting the median estimate of +8.8%.
• Reminder that the MoF will auction 3-Month Bills and 20-Year JGBs later today.