BOJ: MNI BoJ Review – June 2025: QT Taper Mildly More Dovish
Jun-18 04:07
EXECUTIVE SUMMARY
- The BoJ decided to keep its policy rate unchanged at 0.50%, a move fully expected by markets and consensus economists. The decision was made by a unanimous 9-0 vote from the Monetary Policy Committee (MPC).
- The primary focus of the meeting was the pace of quantitative tightening (QT) beyond the near term. From the second quarter of 2026 through the first quarter of 2027, it will slow that pace to ¥200 billion per quarter, a decision backed by an 8-1 vote.
- The BoJ’s policy statement maintained its existing economic and inflation outlook, aside from technical changes to incorporate recent higher inflation prints.
- Importantly, Ueda stated that the BoJ may consider raising interest rates without needing to see clear-cut new signs of rising inflation, should the economic outlook and forecast trajectory warrant such action.
- Overall, the BoJ continues to signal a gradual, data-dependent approach to policy normalisation, balancing market stability, inflation developments, and global uncertainties as it proceeds with cautious tapering into 2026 and beyond.
- Full review here
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AUD: Asia Wrap - AUD Holds Up
May-19 04:05
The AUD/USD had a range of 0.6400 - 0.6422 in the Asia- Pac session, it is trading around 0.6410. AUD/USD continues to find demand sub 0.6400, while underperforming in the crosses.
- “Australia is “up for a deal” with the EU but not at any price, PM Anthony Albanese said, offering cautious optimism after years of talks.”(BBG)
- MNI - The RBA decision is announced tomorrow and is widely expected to cut rates 25bp to 3.85% after Q1 trimmed mean CPI fell within the 2-3% target band. After stronger-than-expected Q1 wages and April employment data, it is likely to retain its cautious tone regarding future easing and reiterate that uncertainty is currently very high. Updated staff forecasts will be published with the meeting statement.
- Bloomberg - “The Australian dollar is positioned for upside should the RBA deliver a hawkish cut. The trimmed mean CPI remains substantially above the middle of the 2 to 3% target range, while labor market data is holding firm and fiscal spending is strong. The central bank is overwhelmingly expected to ease policy, but those factors argue for policymakers to express caution about further reductions if they do so. Investors are betting the RBA will lower rates twice in the second half of the year, so those positions look vulnerable to a rapid unwind.”
- (Bloomberg) -- “A few larger exporters were seen buying the Australian dollar in the Tokyo morning session to hedge out their US dollar receipts, according to Asia-based FX traders.”
- The AUD/USD has found demand around again 0.6400 today, expect buyers to be around on dips while the support in the AUD holds, a close back below 0.6300/50 would start to challenge the newly formed uptrend.
- MNI FX OPTIONS: Expiries for May19NY cut 1000ET (Source DTCC) : AUD/USD: $0.6525(AUD393.9m), Upcoming Strikes : 0.6350(AUD367m May 20)
AUD/JPY - Today's range 92.88 - 93.23, it is trading currently around 93.10. Support is again being challenged back towards the 93.00 area. There should be some demand around 92.00/93.00 first up but a sustained close back below 91.50/92.00 would turn the focus back towards the lows again.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg
US TSYS: Asia Wrap - Yield Curves Steepen
May-19 03:59
TYM5 has traded higher within a range of 109-29 to 110-08 during the Asia-Pacific session. It last changed hands at 109-30, down 0-12 from the previous close.
- The US 2-year yield has edged lower, dealing around 3.988%, down 0.01 from its close.
- The US 10-year yield has moved higher, dealing around 4.510%, up 0.03 from its close.
- This has seen the yield curve steepen in Asia - 2s10s +4.42 at 51.753.
- (Bloomberg) -- “Goldman Sachs interest-rate strategists raise their year-end Treasury yield forecasts following a larger-than-expected reduction in US-China tariffs.”
- “A later and slower baseline for Fed cuts, a still challenging (if less severely so) growth versus inflation trade-off, and the broader fiscal trend all underpin our upward revision to US yields,” wrote a Goldman team including George Cole and William Marshall in a Friday note”
- “Goldman Sachs now sees: End-2025 2-year Treasury yield at 3.90% (3.30% previously), End-2025 10-year Treasury yield at 4.50% (4.00% previously).”
- US HOUSE PANEL APPROVES TRUMP TAX CUT BILL, SETTING UP A POSSIBLE VOTE ON PASSAGE THIS WEEK - [RTRS]"
- The 10-year Yield looks likely to test the 4.5% resistance area again on the downgrade. A sustained break above this level could see another round of selling targeting the 4.75% area. Support towards 4.35% held Friday night, dips back towards here should see supply emerge once more.
- Data/Events : Atlanta Fed President Raphael Bostic , Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson speak at Amelia Island conference. New York Fed President John Williams speaks at an event organized by the Mortgage Bankers Association.
CHINA: Bond Futures Rise on Liquidity Injection
May-19 03:58
- China's bond futures are all higher at lunch time today as the PBOC injected CNY92bn via the open market operations.
- The 10Yr is up +0.13 at 108.76 and taking it through the 50-day EMA of 108.70. The next key technical level above is the 20-day EMA at 108.86
- The 2Yr is up +0.02 at 102.388 and remains below all major moving averages. The nearest is the 20-day EMA at 102.52.
- Government bonds are marginally better today with the CGB 10YR at 1.67% (-0.5bps).
China released a stream of economic data today which in general, remained relatively robust with the exception being the property sector.
