JGBS: Mizuho Highlight Attractiveness Of 5s & 10s Swapped To SOFR

• Worth keeping an aye on the USDJPY, Bond futures are extending gains, Yields are moving lower.
• The USDJPY saw another volatile overnight session, a function of the Dollar on US Tariffs risks, and had already printed a 151.16 low Overnight, although the initial support is still seen at 150.93 Low Feb 07.
• USDJPY is down to 151.65 at the time of typing.

• +6,800 FVH5 106-16.75, buy through 106-16.5 post time offer at 0927:48ET, DV01 $280,000. The 5Y contract trades 106-17.25 last (+2.5).

ECB Executive Board members de Guindos, Lane and Cipollone each played down the role of the neutral rate in calibrating near-term policy last week. This was a seemingly concerted effort to temper expectations ahead of the widely anticipated staff report on r*, which was released on Friday.

• As expected, the report contextualised the recently cited neutral rate range provided by President Lagarde. Staff said "estimates of the nominal r* from the most recent interval range between 1.75% and 2.25%". However, given the large estimation uncertainties, "such ranges should be viewed as merely indicative and alternative methodological ranges were offered” (see here and here for more analysis).
• Given Executive Board comments and the heavily caveated nature of the report, it had little impact on market pricing. ECB-dated OIS price 88bps of cuts through year-end, largely unchanged from a week ago.
• The MNI Policy Team’s latest source piece looked at possible wording tweaks to the ECB’s policy statement at the March decision. While the bank is likely to adjust its reference to policy restrictiveness in the statement, there would be resistance on the Governing Council to completely removing it, as estimates of the neutral rate have edged downwards but remain uncertain.
• The week ahead sees Executive Board appearances from Lagarde (Feb 10, 1615GMT/1715CET), Schnabel (Feb 11), Elderson (Feb 12 at an MNI event – registration link here) and Cipollone (Feb 13).
• Bundesbank President Nagel will speak on the neutral rate of interest on Wednesday, while Bank of Italy Governor Panetta will speak for the first time since November over the weekend.
• In the following publication, we provide a summary of ECB-speak between February 4 and February 10: 250210 - Weekly ECB Speak Wrap.pdf