JGBS: Futures Little Changed Overnight, Natl CPI Mostly In Line

In post-Tokyo trade, JGB futures closed slightly firmer, +4 compared to settlement levels, after US tsys finished 1-2bps richer, off late session bests.

• Housing starts were far stronger than expected in February at 1,501k (1,385k expected). Building permits came close to the mark at 1,456k.
• Import price inflation was stronger than expected in February, printing 0.4% M/M (0.0% consensus, 0.4% prior after +0.1pp rev).
• Industrial production picked up strongly in February after a softer January.
• The focus turns to Wednesday's FOMC policy decision.  
• Today, the local calendar will see Trade Balance, IP, Capu and Machine Orders data ahead of the BoJ’s Policy Decision.
• The BoJ is expected to keep its policy rate at 0.50% in March, with no urgency for another hike after its January increase.
• Analysts expect a gradual rate hike to 0.75% by July or September and 1.0% by early 2026, depending on SME wage trends.  Market pricing reflects uncertainty, with only half of a 25bps hike factored in for June and a full hike not priced until October. (see MNI BoJ Preview here)

Bidding at today’s A$800mn of the 4.25% 21 December 2035 bond is likely to be shaped by several key factors: 

• The current outright yield is around 15bps lower than the previous auction and approximately 25bps lower than the peak in late 2024. The line was opened via syndication on 24 July 2024 for A$11.5bn.
• The 3/10 yield curve has steepened around 15bps since the last auction and hovers near its steepest level since mid-2022.
• Demand for duration should be supported by the improvement in sentiment toward longer-dated global bonds, which has strengthened since mid-January despite some deterioration over recent weeks.
• The line is included in the XM basket.
• While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
• Results are due at 0000 GMT / 1100AEST.

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 4.25% 21 December 2035 bond. The line was last sold on 20 November for A$800mn. The line was opened via syndication on 24 July 2024 for A$11.5bn. 

• The last sale drew an average yield of 4.5983%, at a high yield of 4.600% and was covered 3.00x. There were 37 bidders, 15 of which were successful and 7 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 55.1%.
• This week's ACGB supply aligns with the recent average weekly issuance of $1500mn, with A$700mn of the 2.75% 21 November 2029 bond due on Friday.
• According to the MYEFO 2024-25 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance was revised to approximately A$95 billion, with A$46.4 billion completed at that time. This included around A$2 billion in Green Treasury Bond tenders, of which A$600 million had been issued at that time, and A$3 billion in Treasury Indexed Bonds, with A$1.7 billion completed at that time.
• Results are due at 0000 GMT / 1100AEST.