AUSSIE BONDS: Subdued Session, Market Scales Back Chances Of A Nov Cut

• Following the daily 7-day OMO, a CNY300bn 140-day reverse repo was issued this morning.  
• The 10-Yr bond future is up +0.195 at 107.95, its biggest jump since August whilst the 10-Yr CGB is down at 1.79%.  
• The gains push the 10-Yr above the 20-day EMA of 107.93. 

At the Tokyo lunch break, JGB futures are weaker and at session lows, -12 compared to the settlement levels.

• See the full MNI BoJ Review here.
• The BOJ kept rates at 0.5%, but two members dissented in favour of a 25bp hike, arguing the price target is “more or less achieved” and rates should move “closer to neutral,” highlighting stronger hawkish voices within the board.
• Ueda remained balanced, noting “underlying inflation is approaching 2%, but the 2% level has not yet been reached” and that there is “little sign of tariff having impact on Japan’s economy,” while emphasising ongoing global uncertainty and data dependency.
• Views diverge—some expect a hike in October following the Tankan Survey and LDP leadership election, while others see January 2026 as the base case. Political risks (e.g., dovish LDP candidates) and Fed-driven yen appreciation could delay tightening.
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after Friday’s modest sell-off.
• Cash JGBs are slightly weaker across benchmarks, led by the futures-linked 7-year (+2.3bps). The benchmark 10-year yield is 0.6bp higher at 1.651% versus the cycle high of 1.653% set on Friday.
• Swap rates are 1-2bps higher. Swap spreads are mostly wider.

Markets had been positioned for a cautious, wait-and-see approach from the BoJ at this meeting. 

• Nevertheless, at the time of writing, BOJ-dated OIS pricing was ~5bps firmer across meetings versus Friday’s pre-MPM levels.
• Moreover, post-MPM moves leave 2026 meetings 4-15bps firmer than early August levels.
• Current OIS pricing implies just a 50% probability of a 25bp hike in October, rising to 62% by November and 86% by December.

Figure 1: BOJ-Dated OIS – Today Vs. August 1, 2025 

Source: Bloomberg Finance LP / MNI