JGBS: Twist-Flattener, Tokyo CPI Tomorrow

JGB futures are slightly weaker and off session lows, -11 compared to settlement levels.

• Heading into this week, BoJ watchers largely expected the central bank to raise its benchmark interest rate at either the October or January meeting. The key debate was whether the anticipated fiscal expansion would bring that timing forward. Opinions were divided: some argued it would accelerate a hike, others said it could delay it, while many viewed the impact as neutral or difficult to assess.
• While there appears to be little immediate pressure to raise rates, this week’s announcement of a trade deal between Japan and the U.S. may nudge the BoJ closer to a hike by improving the outlook for economic conditions. This view is supported by recent comments from BoJ Deputy Governor Shinichi Uchida, who said that "uncertainty has receded, and this of course means that the likelihood has risen" for the Bank’s forecasts to be met.
• Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's sell-off.
• Cash JGBs are 2bps cheaper to 3bps richer across benchmarks, with a flattening bias. The benchmark 10-year yield is 1.6bps higher at 1.603% versus the cycle high of 1.616%.
• Swap rates are 1bp higher to 2bps lower. Swap spreads are tighter.
• Tomorrow, the local calendar will see Tokyo CPI, PPI Services, Coincident/Leading Index, Nationwide Dept Sales and Weekly International Investment Flow data.