BOJ: Fixed Rate Purchase Offer​

JGB futures are sitting modestly higher in early Tokyo trade, +16 compared to settlement levels, in line with a slightly richer opening for US cash tsys in Asia-Pac trade. The continued impasse over the US debt ceiling has helped tsys firm on Monday after there was no breakthrough in talks over the weekend. President Biden and House Leader McCarthy are scheduled to meet today.

• Machinery orders, excluding shipbuilding and utilities, fell 3.9% m/m in March from February versus expectations of +0.4%, but the data is unlikely to have provided much impetus for the local market.
• Global funds bought the largest amount of super-long Japanese government bonds since October last month, according to the latest data from the Japan Securities Dealers Association on Monday. Foreign investors were the biggest buyers of intermediate and long bonds. (link)
• Cash JGBs are little changed across the curve with the benchmark 10-year yield is 0.2bp higher at 0.40%, below the BoJ's YCC limit of 0.50%. The 40-year yield is 0.5bp higher at 1.447%, ahead of supply on Thursday.
• Swap rates are slightly lower across the curve with swap spreads tighter.

North American STIR markets were softer in trading ahead of the weekend after the combination of a debt ceiling impasse, Fed Chair Powell’s failure to use a panel discussion to tow a more hawkish line and Tsy Secretary Yellen's comments on potential further bank mergers.

• FOMC dated OIS pricing for the June meeting softened to 5.11% from 5.16% on Thursday.
• BoC dated OIS shifted to a cumulative 11bp of tightening priced by September from 24bp on Thursday.
• RBA dated OIS is flat to 3bp softer across meetings in early trade with an 18% chance of a 25bp hike priced for the June meeting.
• RBNZ dated OIS is 1-5bp softer across meetings currently after shunting firmer following a more stimulatory than expected budget last week. Pricing is 7-25bp firmer post-budget with early ’24 leading. 35bp of tightening is priced for this week’s RBNZ meeting. Terminal rate expectations are at 5.87% after lifting to a new cycle high of 5.92% on Friday.

Figure 1: $-Bloc STIR: Terminal Rate Expectations & Year-End Pricing

Source: MNI – Market News / Bloomberg

Cash tsys have opened dealing 1-2bps richer across the major benchmarks. The continued impasse over the US debt ceiling has helped tsys firm on Monday, there was no breakthrough in talks over the weekend and President Biden and House Leader McCarthy are scheduled to meet today. TYM3 deals at 113-23, +0-05+ a touch off the top of the observed 0-05+ range.

• LPR fixings from China are the highlight of today's Asia-Pac session, no change is expected and these cross in just over one hour.