Stick Or Twist

JGB futures shed 8 ticks in a two-way overnight session, with the swings in global core FI markets and offshore position adjustments ahead of today’s BoJ meeting at the fore (see our full preview of that event here).

• All but one of the 43 economists surveyed by BBG look for the BoJ to leave monetary policy settings unchanged later today (with varying degrees of conviction).
• Markets are more aggressively priced for a YCC tweak, with 10-Year swap rates topping 1.00% for the first time in over a decade at the back end of last week, before paring a portion of the push higher through the first couple of Tokyo sessions, closing at 0.92% on Tuesday. The test of the BoJ’s will re: its 10-Year yield cap is well-documented, having triggered record Bank purchases.
• Basis trades (futures vs. cash equivalents) continue to be a feature given the distortion between the pricing of the two, as the BoJ’s market functioning worries deepen.
• Whatever the outcome, expect plenty of post-decision volatility.
• Elsewhere, final industrial production readings and core machine orders data round out Wednesday’s local docket.