A sharp drop in JGBs following the Bank of Japan's shock move to raise the upper limit of its Yield Curve Control band has reverberated across global core FI Tuesday.

• While short-end yields rose on December's latest hawkish central bank surprise, the nature of the BoJ move (raising the ceiling on 10Y JGB yields to 0.50% from 0.25%) has had more of an impact further down the curve with bear steepening.
• Though the move has softened since the initial shock, curves remain steeper: UK and German 2s10s +2bp, US +5bp.
• Periphery spreads initially moved wider on the risk-off move, but have since narrowed as equities have recovered.
• Featuring on the schedule today is more US housing data (starts and building permits), following from yesterday's weak NAHB reading. We also get Dec Eurozone consumer confidence.

Latest levels:

• Mar 10-Yr US futures (TY) down 17.5/32 at 113-19 (L: 113-11.5 / H: 114-05.5)
• Mar Bund futures (RX) down 101 ticks at 136.14 (L: 135.83 / H: 137.22)
• Mar Gilt futures (G) down 100 ticks at 101.45 (L: 100.88 / H: 101.73)
• Italy / German 10-Yr spread 0.5bps tighter at 217.4bps