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• After doing very little Monday, bond futures have started Tuesday off with a rally.  
• The 10-Yr is up +0.10 at 107.76 and is near to the 20-day EMA of 107.81
• The 2-Yr future is up +0.01 at 102.35 and is near the 20-day EMA of 102.36.
• The 10-Yr government bond is at 1.88%

At the Tokyo lunch break, JGB futures are stronger, +9 compared to settlement levels.

• MNI - 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. The disclosures gave no clear signal of an October move, with most members aside from Naoki Tamura and Hajime Takata - who dissented and proposed a hike - seeing little urgency.
• MNI - Japan's industrial output fell 1.2% m/m in August, marking a second straight decline after July's 1.2% drop, as stronger automobile production was offset by weakness in electrical machinery and information and communications equipment, data from the Ministry of Economy, Trade and Industry showed Tuesday.
• Industrial output is a key indicator for BOJ economists tracking the pace of Japan's modest recovery as it reflects both external and domestic demand.
• Cash US tsys are slightly cheaper, with a steepening bias, in today's Asia-Pac session after yesterday's bull-flattener.
• Cash JGBs have bull-flattened across benchmarks, with yields flat to 3bps richer. The benchmark 10-year yield is 1.2bps lower at 1.631% versus the cycle high of 1.670%.
• Swap rates are little changed.

Ahead of today’s RBA policy decision, RBA-dated OIS pricing is sharply firmer across 2026 meetings versus last Wednesday’s CPI levels. 

• The headline August CPI print was 3.0%y/y, against a 2.9% market consensus and 2.8% July outcome. The trimmed mean was 2.6% y/y, after printing 2.7% in July.
• The Q3 CPI print is out on Oct 29, with the RBA outcome on Nov 4.
• A 25bp rate cut today is given a 3% probability, with a cumulative 17bps of easing priced by year-end.

Figure 1: RBA-Dated OIS – Today Vs. Pre-CPI

Source: Bloomberg Finance LP / MNI