STIR: Repo Reference Rates

JPY remains supported by the broader pre-U.S. CPI pullback in core global FI yields, with gilts outperforming in the wake of local labour market/wage data.

• When it comes to BoJ-induced moves and the JPY, Citi write “while Monday's Bloomberg story played down BoJ Dec event risk, but we're seeing markets turn focus to a January policy change. As a result, JPY vols remain firmly bid and the BoJ Jan event is on a 29 handle now.”

The Norges Bank’s December meeting outcome is likely the closest call amongst all DM Central Banks reporting this week.

• On balance, the softening of underlying inflation in the November data alongside trends in activity data and global rate paths should buy the Norges Bank time to adopt a ‘wait and see approach’ in December and deliver a hold.
• If this were to be realised, the revised policy path will still reflect the risk of an additional hike at the January meeting but may show a slightly lower peak rate (vs 4.44% in Q1/Q2 2024 at present).