JGBS: Futures Hold Post BoJ Bounce, Tokyo CPI Stronger Than Forecast

In post-Tokyo trade, JGB futures closed slightly weaker, -3 compared to settlement levels, after US tsys finished with a modest twist-steepener.

• US Govt likely to shutdown at midnight tonight - the first time since late Dec 2018 when the government shutterd for 35 consecutive days.
• (Bloomberg) - "Markets are focused on how Japan will finance $550 billion in investment it has agreed to make in the US as part of a trade deal with President Donald Trump. The readily available resources that meet Tokyo's funding conditions don't look sufficient - we see a $250 billion shortfall."
• "The 3Q Tankan is set to show resilient business sentiment, reinforcing the case for the Bank of Japan to pare stimulus as early as October, writes Bloomberg Economics." - BBG
• MNI: BOJ Opinions: Board Split Over Rate Hike, Inflation. Bank of Japan board members were split over whether to raise the policy rate at the September 18-19 meeting, with some calling for more data and others pushing for an increase, the summary of opinions released Tuesday showed.
• Today, the local calendar will see Tankan Survey Results and S&P Global PMI Mfg (F).

ACGBs (YM -4.0 & XM -4.5) are weaker with attention on a possible US government shutdown. Nevertheless, Q3 ended on a mostly bullish note, as month- and quarter-end rebalancing added to expectations of Fed rate cuts.

• (Bloomberg) -- Australian home prices posted their strongest monthly gain in nearly two years, with an expanded government incentive for first home buyers expected to further intensify buyer demand at a time of already tight supply and declining borrowing costs.
• MNI RBA WATCH: Governor Michele Bullock declined to say whether the Reserve Bank of Australia retains an easing bias after the Board held the cash rate at 3.6% on Tuesday, stressing that future moves will depend on incoming data, with the current level still viewed as slightly restrictive.
• Cash ACGBs are 4-6bps cheaper with the AU-US 10-year yield differential at +21bps.
• The bills strip is -4 to -5 beyond the first contract.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
• Today, the local calendar will also feature the S&P Global PMI Manufacturing (F).
• AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond.

In local morning trade, NZGBs are unchanged after US tsys finished with a modest twist-steepener.

• US Govt likely to shutdown at midnight tonight - the first time since late Dec 2018 when the government shutterd for 35 consecutive days.
• "SENATE TO VOTE THIS WEEKEND ON REOPENING GOVERNMENT", Bbg.
• "BLS will suspend all operations. Economic data that are scheduled to be released during the lapse will not be released. All active data collection activities for BLS surveys will cease. The BLS website will not be updated with new content or restored in the event of a technical failure during a lapse."
• MNI INTERVIEW: RBNZ To Eye 2% OCR Level - Ex Assistant Gov. The Reserve Bank of New Zealand is likely to need to cut the 3% Official Cash Rate by 100 basis points over the medium term to stabilise output and inflation following weaker-than-expected Q2 GDP data, a former assistant governor told MNI.
• NZ home-building approvals rose 5.8% m/m in August versus revised +5.3% in July
• Swap rates are little changed.
• RBNZ dated OIS pricing is little changed across meetings. 34bps of easing is priced for October, with a cumulative 62bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.50% May-35 bond.