BOJ: Press Conference Concluded, Few Fresh Signals To Digest

Long end underperformance in German swap spreads & ASWs this morning, ahead of the impending 20- & 30-Year supply, while the recovery from lows in wider Bunds provides support for the rest of the swap spread term structure.

• Zooming out, Commerzbank note that the cheapening theme “in Bund swap spreads continues. Spreads have been moving in line with outright yields over the past days and are now back at levels seen before Liberation Day. This tallies with the notion that de-dollarisation flows remain absent, bringing German fiscal concerns back into the driving seat. While a near-term correction also seems possible here if the equity sell-off continues, we stick to our view of further swap spread cheapening at the long-end over the coming months”.  

• SX5E (21st Nov) 4650/4600ps, bought for 2 in 6.25k.
• SX5E (21st Nov) 4350/4300ps, bought for 1 in 12.5k.

EURSEK has pared the modest increase seen into the policy decision, now up 0.13% today at 11.1880 (vs a session high of 11.2015). There’s also little net change in rates at the front of the FRA curve. 

• Overall, the August decision keeps a September cut on the table, but does not signal an urgent need to ease policy at that meeting. The recent inflation rise is deemed as temporary, but still requires “vigilance”, while the Board is still cautiously optimistic about an economic recovery.
• There is plenty of data still due ahead of the September 23 decision, including August inflation and final Q2 GDP.
• Focus turns to the tone of the Governor’s press conference at 1000BST/1100CET.
• First Deputy Governor Breman will also give a presentation on the latest rate decision tomorrow, before the full August minutes are released next Tuesday.