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At the lunchtime break, JGB futures are holding negative, 133.29, -.14 versus settlement levels. Recent lows at 133.18 remain intact, while upticks continue to be faded, with a negative technical bias in play. US bond futures have failed to kick on from the overnight lead in and are down modestly during the morning session in Asia, which may be spilling over to JGBs at the margin. 

• JGB yields are little changed in the first part of Thursday dealings. The 10yr was last near 1.97%, up a touch but short of recent cycle highs (close to 1.98%). The 2yr is around 1.07%, as Friday's BoJ meeting outcome comes into focus.
• The market is fully priced for a hike. Beyond December, attention will focus on guidance around the neutral rate, which Ueda has described as "1-2.5%," signalling that policy normalisation is likely to continue gradually rather than end at 1%. See our preview here:
• Earlier data was firmer on the export side and core machine orders, but isn't likely to shift BoJ thinking around the economic backdrop. 

• An article in the China Securities Journal assess policy in 2025 describing it as 'supportive' suggesting that since the beginning of the year various policy tools have worked together to guide financial institutions to increase their support for the real economy, whilst 'anchoring the goal of stable financial markets.
• Looking at the potential for policy in 2026, the article points to more of the same with the continuation of the current 'moderately loose' monetary policy, adhere to precise policy implementation whilst using flexible tools like RRR cuts and interest rate cuts  to promote overall social financing costs.  
• On social financing costs, the article points to overall social financing costs being at historical lows with lower loan interest rates thanks to cuts in the 7-day reverse repo rate, whilst lower housing provident fund loan rates are lower also. The weighted average interest rates for new corporate loans was 30bps lower than a year ago.  
• The recent Central Economic Work Conference clearly stated that various policy tools, such as reserve requirement ratio (RRR) cuts and interest rate cuts, will be used flexibly and efficiently in what appears to leave room for further RRR and interest rate cuts in 2026.
• The focus on financing costs and banks willingness to lend will support the government's goal of improving domestic demand and target innovative industries viewed as important to the future development of the economy.  
• It appears from this article that there is no imminent change to come, rather more of the same as the economy remains on track to achieve the 5% GDP growth target.  
• Instead, it appears now that the already 'supportive' policy provides a backstop and could be altered if needed.  
• Going forward we continue to monitor social financing costs and lending data as a key insight for future direction of policy.  

Jim Chanos, the renowned short-seller, recently did an interview with Jack Farley on his podcast The Monetary Matters Network. In it he expressed significant skepticism regarding the financial viability of various companies in the AI ecosystem, particularly those focused on data center ownership and GPU hosting. This comes at a time when broader tech led equity gains are under the microscope as we approach year end. Below is a summary of some of the podcast highlights together with a link to the podcast for those who have the time and are interested.  https://youtu.be/R1HrPsfUkbk?si=2TgmzClqaIE8hZ63

• Chanos asserts that the business of hosting GPUs is a low-margin, commodity business and that the real value lies in the AI output produced by the chips, not their physical location. 
• He highlights that current AI spending is characterized by a high percentage of unprofitable underlying customers, a risk he believes is worse than the dot-com and telecom bubbles, and specifically points out Oracle as a major concern among hyperscalers due to its rapid, low-return capital buildout. 
• "What's scary about this one is that the underlying customers that are spending a lot of the money are unprofitable and so it raises the risk level I think in a way that's worse than 1999 2000." Furthermore, Chanos discusses the high cost and risk of financing this capital-intensive growth, comparing current financing methods like convertible bonds and private credit to the dangerous practices seen in the late 1980s junk bond market.
• So far, only Microsoft and Meta appear to be earning returns on their massive AI investments that are well above their cost of capital. At the other end of the spectrum, companies like Amazon and, most notably, Oracle are currently "destroying value."