JGBS: Core CPI Measures Provide Few Surprises, Focus On BoJ Decision

Ahead of the Tokyo lunch break, JGB futures are weaker, -3 compared to settlement levels, but off worst levels.

• The year-on-year rise of Japan's annual core consumer inflation rate accelerated to 3.0% in December as expected from November’s 2.7% due to higher prices of energy and foods excluding perishables.
• December’s index stayed above the Bank of Japan’s 2% target for the 33rd consecutive month.
• The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 2.4% y/y in December, unchanged from 2.4% in November.
• BOJ officials maintained the view that services prices continued to rise steadily as businesses transferred high material and labour costs to retail prices, and they are focused on corporate price revisions and wage hikes in or after April, MNI understands.
• Market expectations currently indicate: a 95% probability of a 25bp hike today; a cumulative 98% chance by March; and more than a full 25bp increase by May 2025 (110%).
• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s twist-steepener.
• Cash JGBs are flat to 1bp cheaper across benchmarks out the 30-year and 1bp cheaper beyond. The benchmark 10-year yield is 0.7bp cheaper at 1.216% versus the cycle high of 1.262%.
• Swap rates are little changed. Swap spreads are tighter generally.