JGBS: Cash Bond Twist-Flattener, BoJ Hike Almost Fully Priced
Jan-22 05:06
JGB futures are weaker and at session lows, -18 compared to settlement levels.
- The BoJ will announce its latest monetary policy decision this Friday, with expectations that it will move further along its policy normalization path. Both market consensus and our analysis suggest a 25bps rate hike as the most likely outcome.
- The BoJ raised rates twice in 2024, first in March and again in July. However, it has maintained a hold since then, largely due to market volatility, including significant yen swings after the July hike. Political uncertainty has also played a role, as the ruling coalition lost its majority in lower house elections late last year.
- Market expectations currently indicate: a 93% probability of a 25bp hike in January; a cumulative 96% chance by March; and a full 25bp increase priced by May 2025.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-flattener.
- Cash JGBs have twist-flattened, pivoting at the 30-year, with yields 2bps higher to 2bps lower. The benchmark 10-year yield is 0.9bp higher at 1.203% versus the cycle high of 1.262%.
- Swap rates are ~2bps higher.
- Tomorrow, the local calendar will see Trade Balance, International Investment Flow and Tokyo Condominiums for Sale data alongside an Enhanced Liquidity Auction covering 1-5-year OTR JGBs.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
BONDS: ACGB Richer, 10yr Yield 9bps Lower, RBA Minutes Tomorrow
Dec-23 05:03
Aussie bonds have outperformed in the APAC region today, curves have bull-flattened, with yields trading 5-10bps lower, with the 10yr outperforming.
- ACGB yields have rallied today, outperforming the US Tsys move, with the passing of the US stopgap bill supporting markets. The 2yr is is -5.7bps at 3.919%, while the 10yr is trading -9.2bps at 4.40%. The 2s10s dropped 3.5bps at now trades 46.50bps, it briefly touched 50bps on Friday.
- ACGB futures are currently YM +6.0, VTA +4.5, XM +9.5
- Swap curves are trading -2bps across the curve
- Bill strip is +2 to +6,
- RBA-dated OIS pricing has firmed 1-3bps across the the next few meetings today, with 17bps of cuts priced for Feb, or a 69% chance of a cut, the first full cut is now priced in for the April meeting. Further out the curves there is 72.5bps of cumulative cuts now priced by December 2025, down from 80bps to start the week.
- Tomorrow we have the Minutes of the RBA December rate meeting, which will close out the year for any data releases.
BONDS: NZGBs Close Richer As Curve Bull-Flattens
Dec-23 04:49
NZGBs have closed richer today, outperforming the move made on Friday in US tsys. In has been a very slow session
- New Zealand’s Treasury Department acknowledges a deeper-than-expected economic downturn but remains optimistic about a recovery beginning in early 2025, as highlighted in its Fortnightly Economic Update. Indicators such as improving consumer and business confidence, easing inflationary pressures, and higher card spending suggest the worst may be over. However, they caution that future GDP revisions could remain larger than usual.
- NZ's residential mortgage lending in November totaled NZ$7.41b, up 13% y/y but down 4% m/m after seasonal adjustment. First-home buyers accounted for NZ$1.5b (20.2% of total), a 3.7% annual decline, while investors borrowed NZ$1.6b, up 41% y/y. The number of new mortgage commitments fell 1.5% m/m to 18,981.
- US Cash tsys are trading +/- 0.5bps, curve slightly flatter. The 10yr hovers just above the 4.50% level at 4.52%.
- NZGBs curve has bull-flattened today, the 2yr is -2.8bps and trades at yearly lows, while the 10yr is -8.4bps at 4.446%. The 3s10s is +0.5bps at trades at its steepest level this year.
- RBNZ dated OIS is pricing is little changed today with 54.7bps of cuts for the Feb meeting, and 100bps of cumulative cuts are now priced in by May. There is a cumulative 124bps of cuts priced in through to October 2025.
- There is no further data out for New Zealand this year.
JGBS: Futures Drift A Touch Lower, JGB Yields Unchanged
Dec-23 04:44
JGB futures have had a slightly downside bias since the lunchtime break, but overall moves remain contained. The March contract (JBH5) last 142.42, -.05 versus settlement levels. US Tsy futures have been relatively steady today as market wind down for the holiday period later this week.
- Cash JGB yields are little changed, the 10yr remaining just under 1.07% at this stage. The 10yr swap rate is around 1.015%, also little changed for the session. Aggregate moves are less than 1bps across keys parts of the JGB curve and swap rate space.
- We do have some BoJ and data event risks this week, the mins of the BoJ Oct meeting are out tomorrow, services PPI on Wednesday (Christmas day), along with a Ueda speech. On Friday the Tokyo CPI for Dec prints.
- It remains to be seen if these events shift market sentiment, as the central bank awaits January trends on wages (for 2025), along with early US policy shifts (under the returning Trump administration).
