JGBS: Futures Stronger After Reversing O/N Weakness, Tokyo CPI Tomorrow

Aggregate moves in G10 FX have been muted so far today. The BBDXY USD index was last down a touch to 1271.4. There has been very limited data out in the Asia Pac region, while the BoJ minutes signaled caution around further rate hikes, but didn't shift yen sentiment. BoJ Governor Ueda was also before parliament, which largely focused on balance sheet issues. 

• USD/JPY was last near 150.55/60, off earlier highs of 150.94. This was close to the 50-day EMA resistance point (151.01). Yen is now slightly firmer for the session. Board members expressed caution at the January 23-24 meeting, which saw the policy rate increase 25 basis points to 0.50%, with gradual hikes touted as the most preferred path, according to the minutes. Governor Ueda stated in parliament that that the stock effect stemming from the BOJ’s significant government bond holdings would contribute to lower long-term interest rates for the time being.
• NZD/USD is down slightly, last near 0.5720, but remains above recent lows. AUD/USD is little changed, last holding close to 0.6285/90. CNH has been a touch weaker, while IDR slumped to fresh lows since the Asian Financial Crisis in 1998. This didn't spill over negatively to AUD though. Likewise in terms of weaker Hong Kong equities, which are down on data center bubble concerns.  
• US equity futures sit down a touch, while US yields are off around 1bps.
• In Australia the FY2026 budget is announced at 1930 AEDT today and is widely expected to show deficits across the forecast horizon and an upward revision to the debt ratio. 
• Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released.

JGB futures are weaker and hovering near session lows, -34 compared to settlement levels.

• * (MNI) BoJ board members expressed caution at the January 23-24 meeting, which saw the policy rate increase 25 basis points to 0.50%, with gradual hikes touted as the most preferred path, the published minutes showed Tuesday.
• “BoJ Governor Ueda says the central bank will take into account market conditions and assess appropriate pricing when it creates a plan for how to divest its holdings of ETFs and J-REITs. The decline in the BoJ’s JGB holdings has been extremely gradual, Ueda said when asked about the impact on bond yields stemming from the BoJ’s efforts to reduce such holdings.” (per BBG)
• “Japanese Prime Minister Shigeru Ishiba plans to draw up “powerful” measures to mitigate the impact of inflation.” (per Kyodo via BBG)
• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's heavy session.
• Cash JGBs are flat to 3bps cheaper across benchmarks, with the belly underperforming. The benchmark 10-year yield is 2.8bps higher at 1.573% and just shy of the cycle high of 1.584%.
• Swap rates are 1-2bps higher, with swap spreads mixed.
• Tomorrow, the local calendar will see PPI Services and Coincident/leading Indices data.

ACGBs (YM flat & XM -2.5) are slightly weaker but Sydney session highs on a data-light session.

• Today we will see the Federal Budget presented around 1930 AEDT. A Federal Election is likely to be called soon after. The Budget is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Cash ACGBs are flat to 2bps cheaper with the AU-US 10-year yield differential at +9bps.
• Swap rates are 1-2bps higher.
• The bills strip is -1 to -2 across contracts.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in April is given a 3% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar will see February CPI data.  It is the middle month of the quarter and so will include updates to services components. Headline is forecast to be steady at around 2.5%. The trimmed mean printed at 2.8% in January.
• The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond tomorrow and A$700mn of the 1.25% 21 May 2032 bond on Friday.