EM ASIA CREDIT: MNI EM Credit Market Update - Asia

JGB futures have weakened slightly to session lows, -10 compared to settlement levels, following the BoJ Policy Decision.

• The BoJ held its policy rate steady at 0.50%, as widely expected, with a unanimous 9-0 vote.
• The BoJ will maintain its current bond-buying plan through March 2026, but starting April 2026, it will reduce JGB purchases by ¥200 billion per quarter.
• The decision to begin tapering, however, was not unanimous — Board Member Tamura dissented, arguing for a faster reduction of ¥400 billion per quarter and a more market-driven long-term rate framework. The BoJ will decide on further tapering plans for April 2027 and beyond at the June 2026 policy meeting.
• The BoJ emphasised that tapering will proceed in a predictable and cautious manner, but left the door open to adjustments if market conditions require.
• The BoJ reaffirmed its intention to respond flexibly to any sharp rise in yields. It views price trends as broadly in line with its 2% inflation target in the second half of its outlook period.
• Cash JGBs are flat to 3bps cheaper across benchmarks, with the 10-year underperforming. The benchmark 10-year yield is 3.2bps higher at 1.471% versus the cycle high of 1.596%.
• Swap rates are 1-3bps higher, with a mild steepening bias. Swap spreads are mixed.

• BOJ: TAMURA PROPOSES JPY400 BLN JGB TAPER UNTILQ1 2027
• BOJ: TAMURA PROPOSAL VOTED DOWN

• China's bond futures are up today as equity markets weaken.  
• The 10YR future is up +0.06 to 109.07 and remains above all major moving averages, the nearest being the 20-day EMA at 108.90
• The 2YR future is up +0.06 to 102.52 and has traded above the 50-day EMA of 102.50.  Above is the 100-day EMA of 102.62 and the 200-day EMA of 102.78.
• The move in cash bonds has been less pronounced with the 10YR CGB at 1.69%