Unchanged BoJ Triggers About Face In ACGBs, Bull Flattening On The Day

The BoJ’s choice to leave its YCC parameters unchanged, despite market speculation to the contrary (even though the majority of the sell-side economists looked for no change in monetary policy settings, with varying degrees of conviction) put a bid into ACGBs on Wednesday.

• That left YM +4.0 & XM +6.0 at the bell, with the early bear steepening impulse (derived from wider core global FI trade on Tuesday) flipping to bull flattening. The major cash ACGB benchmarks run 4-6bp richer, with the 7- to 12-Year zone outperforming on the curve.
• The early EFP narrowing reversed on the move, suggesting that bonds led the swings in both directions.
• Bills finished 1-3bp firmer through the reds, once again reversing the overnight/early Sydney cheapening. RBA dated OIS was little changed on the day, showing ~20bp of tightening for next month’s gathering and a terminal cash rate of somewhere between 3.70-3.75%.
• Looking ahead, the monthly labour market report and consumer inflation expectations print headline local matters on Thursday.