Weaker Ahead of BoJ Monetary Policy Decision

In post-Tokyo trade, JGB futures have cheapened, closing -23 compared to settlement levels, ahead of today’s BoJ Monetary Policy Decision. Cash US Tsys weakened 5-12bp across major benchmarks following a stagnation-like Q1 GDP print.

• At 147.83, JBM3 is once again in the range of 147.40-147.92 that it has been trading in since early April, after spending the last two days above it. With the latest pullback in JGBs looking corrective, according to MNI’s technical analyst, attention remains on 149.53, the March 22 high. On the downside, the 50-DMA provides support at 146.99.
• With the BoJ decision looming, there appears to be less market pressure on the bank as no significant policy changes are expected today. The current S&P-JPX JGB VIX level is lower than that ahead of the January and March meetings. Moreover, the YCC "ceiling" of 0.50% has remained untested since March, while 10-Year swap spreads are still well below their peak levels during this cycle. Investors will be paying close attention to the central bank's outlook and guidance. There is also speculation about whether the bank will announce a review of its long-term performance and policy settings. The MNI preview is here.
• On the local data front, Tokyo Headline and Core CPI printed higher than expected at +3.5% Y/Y and +3.8% Y/Y versus expectations of +3.3% and +3.5%.