JGBS: Cash Little Changed At Lunch, Gov Ueda Talks Tariffs

At the Tokyo lunch break, JGB futures are holding weaker at session cheaps, -28 compared to the settlement levels.

• Jibun Bank and S&P Global February Manufacturing PMI rises to 49 from 48.7 in January.
• Cash US tsys are 2-3bps cheaper in today’s Asia-Pac session after an emergency security summit in London on Sunday raised bets of increased European debt supply for defence spending. UK Prime Minister Keir Starmer convened the summit, including France’s Emmanuel Macron, as well as delegations from Canada, Germany, Norway and Turkey, in a bid to strengthen Ukraine’s position, secure a “lasting peace” and plan for security guarantees. (per BBG)
• Cash JGBs are flat (40-year) to 3bps cheaper (5-10-year zone) across benchmarks. The benchmark 10-year yield is 3.0bps higher at 1.408% versus the cycle high of 1.466%.
• The 30-year yield is 0.5bp higher at 2.365%, the highest since 2008.
• Swap rates are 1-2bps higher. Swap spreads are mixed.

RBA-dated OIS pricing is flat to 3bps firmer across meetings today. 

• Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through July are 2-5bps firmer, while those beyond are 2-9bps softer.
• Last week, January headline CPI inflation printed slightly lower than expected at 2.5% y/y, in line with December. However, the underlying trimmed mean rose 0.1pp to 2.8%, but still below the top of the RBA’s 2-3% band. The first month of the quarter has limited updates for services inflation. The seasonally adjusted data is consistent with the RBA remaining cautious with it stating that “upside risks remain”.
• A 25bp rate cut in April is given a 9% probability, with a cumulative 57bps of easing priced by year-end (based on an effective cash rate of 4.09%). 

Figure 1: RBA-Dated OIS – Today Vs. Pre-RBA Levels

Source: MNI – Market News / Bloomberg

Authorities are expected to focus on promoting consumption and developing AI, and other emerging sectors during the upcoming “Two Sessions” this week, China Fund News reported, citing analysts. Except for the trade-in program for consumer goods, more medium- and long-term measures to boost spending are also expected, such as offering maternity allowance and supportive measures for pension and social security, said Zhu Guoqing, deputy general manager at Pengyang Fund.