JGBS: Little Changed After BoJ Delivers Expected Result
Jul-31 03:45
JGB futures are weaker, -15 compared to settlement levels, as trading resumes following the BoJ Policy Decision.
- The BoJ left its benchmark interest rate unchanged and raised its inflation forecasts, as it continues to evaluate the economic effects of President Donald Trump’s recent tariffs following an unexpected trade agreement last week.
- The BoJ unanimously voted to keep the overnight call rate at 0.5%, a move widely anticipated.
- In its quarterly economic outlook, the nine-member board raised its median inflation forecast for the current fiscal year, citing sustained food price pressures. It also made modest upward revisions to its inflation projections for fiscal 2026 and 2027, and slightly lifted its growth forecast for this year.
- On balance, the statement brings us marginally closer to a further rate hike, given the central bank's degree of uncertainty was slightly softened. Still, the BoJ seems unlikely to act in the near term (the next policy meeting is on Sep 19, followed by Oct 30).
- Cash JGBs are ~1bp cheaper across benchmarks in early afternoon trade. The benchmark 10-year yield is 0.9bp higher at 1.570% versus the cycle high of 1.616%.
- Swap rates are ~1bp higher.
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JGBS AUCTION: 10-Year JGB Auction Results
Jul-01 03:40
The Japanese Ministry of Finance (MoF) sells Y1,977.6bn 10-Year JGBs:
- Average Yield: 1.442% (prev. 1.512%)
- Average Price: 100.50 (prev. 99.04)
- High Yield: 1.446% (prev. 1.513%)
- Low price: 100.47 (prev. 99.03)
- % Allotted At High Yield: 96.5206% (prev. 66.8994%)
- Bid/Cover: 3.5070x (prev. 3.6627x)
CHINA: Bond Futures Deliver Morning Gains
Jul-01 03:36
- China's key bond futures all delivered gains in morning trade as the PBOC withdrew liquidity in the OMO
- The 10YR future is up +0.06 to 108.96 and is approaching the 20-day EMA of 108.98
- The 2yr future is up +0.01 to 102.50 and is approaching the 50-day EMA of 102.50
- The CGB 10YR is 1.65% in this mornings trading.
JGBS AUCTION: 10Y Supply Faces A Lower Yield & Flatter Curve
Jul-01 02:58
The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 3 June 2025. This month’s auction offers an outright yield 5-10bps lower than last month and approximately 15bps below the recent cyclical high of 1.596% reached in late March, just prior to President Trump’s announcement on reciprocal tariffs.
- Moreover, the 2s/10s and 7s/10s yield curves are flatter than last month.
- Notably, investor sentiment toward longer-dated global bonds has improved over June.
- Governor Kazuo Ueda reaffirmed on June 20 that the BoJ would consider raising its benchmark interest rate if its economic outlook materialises. Speaking at a financial conference in Tokyo, Ueda noted that Japan's real interest rate remains significantly low and emphasised the importance of assessing whether the BoJ's projections are being met, without preconceived assumptions.
- Against this backdrop, it remains to be seen whether the current 10-year yield level will be sufficient to maintain strong demand in today’s auction.
- Results are due at 0435 BST / 1235 JT.
