Unscheduled BOJ Bond Purchase Sees Futures Spike Higher But It Quickly Reverses

JGB futures are sitting just above session lows, -12 compared to settlement levels, despite the BOJ’s unscheduled bond purchase of Y300bn 5- to 10-year JGBS at market prices.

• In addition to the earlier releases of Tokyo CPI, industrial production and retail sales, the local docket has just printed Housing Starts and Consumer Confidence data. Housing starts print -9.4% y/y vs. -8.7% est., while confidence prints 35.2 vs. 36.2 est.
• The cash JGB curve has bear-steepened, with yields 0.6bp to 1.9bps higher. The benchmark 10-year yield is 0.4bp higher at 0.765%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also below the cycle high of 0.774% set today, before the BOJ bond purchase.
• Bloomberg reports that investors need to prepare for Japan’s benchmark 10-year bond yield rising to around 2% if the central bank’s inflation goal is realized and it ends its negative-rate policy, according to a former research chief at the Bank of Japan. (See link)
• Swap rates are slightly mixed across the curve. Swap spreads are tighter across maturities.
• Monday the local calendar sees BOJ Summary of Opinions (Sept. MPM), Tankan Mfg & Non-Mfg Indices and Jibun Bank Mfg PMI.