BOJ: Hikes & Retains Tightening Bias, No Hints On Timing
The BoJ hiked rates by 25bps to 0.75%, as widely expected by both sell-side economists and what was priced in by the market. As expected the BoJ kept the bias for further rate hikes intact, by stating it will keep raising rates if the economic and price outlook is realized. Timing on further rate hikes wasn't provided though. Supporting the stance around further rate hikes, the BOJ stated that accommodative conditions will keep supporting the economy and that real rates remain at a significantly low level. This fits with the BoJ still seeing policy rates under neutral levels (with the range being described in the 1-2.5% area for neutral). This is something that is likely to be a focus point at Governor Ueda's press conference later. This is held at 3:30pm local time.
- While the decision was unanimous to raise rates, board members Tamura and Takata objected to the description of the price outlook. Takata stating that the rate of increase in CPI inflation, along with underlying CPI, was already around the price stability target.
- The core board view was that underlying inflation was likely to converge with the BoJ's target in the latter half of the 3yr projection period. On growth, the economy was seen as recovering modestly with some pockets of weakness.
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JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y600.7bn 20-Year JGBs:
- Average Yield (%): 2.809 (prev. 2.674)
- Average Price: 98.61 (prev. 100.33)
- High Yield (%): 2.833 (prev. 2.684)
- Low price: 98.30 (prev. 100.20)
- % Allotted At High Yield (%): 64.9769 (prev. 9.6410)
- Bid/Cover: 3.2825x (prev. 3.5599x)
JGBS: Modestly Cheaper Ahead Of 20Y Supply, BOJ/FinMin Meeting Today
At the Tokyo lunch break, JGB futures are weaker, -21 compared to settlement levels.
- Headlines crossed a little while ago that BoJ Governor Ueda will meet with Japan FinMin Katayama and Economy Minister Kiuchi later today. The meeting is expected to take place at 910GMT, which is 6:10pm Tokyo time. At 930GMT, FinMin Katayama will hold a press conference. This follows yesterday's meeting between Ueda and Japan PM Takaichi. From that meeting, via BBG: " Ueda told Takaichi that the BOJ is gradually scaling back its easing measures, which he said she understood. He added that they also discussed recent currency moves."
- This meeting also comes amid renewed speculation around Japan's fiscal outlook. The Kyodo news agency reported on Wednesday that Japan's stimulus package could exceed 20 trillion yen and be funded by an extra budget of around 17 trillion yen."
- Cash US tsys are flat to 1bp cheaper in today's Asia-Pac session. Nvidia's earnings are in focus and due after the market close on Wednesday.
- Cash JGBs are 1-2bps cheaper across benchmarks. The benchmark 20-year yield is 1.7bps higher at 2.804% after setting a fresh cycle high of 2.822% earlier today.
- Swap rates are 1bp higher to 2bps lower, with a flattening bias.
JGBS AUCTION: 20Y Supply Faces A Yield & A Curve At/Near Cyclical Highs
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 15 October 2025.
- Today’s 20-year JGB auction offers an outright yield at its cycle high, 10-15bps above last month’s level.
- Moreover, the 10/20 yield curve remains near its recent high, its steepest since 1999.
- The 20-year JGB is at similar valuation to last month in terms of the 10/20/30 butterfly.
- On the other hand, the auction comes amid an improvement in sentiment toward long-term global bonds.
- Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
- Results are due at 0335 GMT / 1235 JT.
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