Yields Higher Lead By 10Y, Q1 GDP On Monday, BoJ Decision On Friday

JGB futures are weaker and at session cheaps, -28 compared to the settlement levels.

• Outside of the previously outlined real household spending, there hasn't been much in the way of domestic drivers to flag. Leading and Coincident Indices have just printed flat to slightly stronger than expectations.
• Cash JGBs are cheaper across benchmarks, with yields 0.5bp (1-year) to 2.2bps higher (5- & 10-year). The benchmark 10-year yield is 0.986% versus the cycle high of 1.101% set last week.
• Consistent with the results of today’s BoJ Rinban operations, which saw positive spreads across all buckets and higher offer cover ratios for the 1-3-year and 5-10-year buckets, JGBs out to the 10-year have been pressured in the early rounds of the afternoon session.
• The swaps curve has bear-steepened, with rates 1-3bps higher. Swap spreads are mixed.
• On Monday, the local calendar will see Q1 GDP (Final), May Bank Lending and April Trade Balance data alongside the Eco Watchers Survey.
• Further out, we do not expect any change at next week’s monetary policy meeting on June 13-14, i.e., we expect the policy rate to remain at 0-0.1%. However, we do expect the BoJ to likely reduce JGB purchases, which are currently around ¥6 trillion per month, similar to the levels before the Bank ended yield curve control in March.