JGBS: Richer & Near Bests After SoO / Tokyo CPI Combo

RBA-dated OIS pricing is softer for late 2025 / early 2026 meetings today. 

• As a result, pricing remains mixed compared to last Tuesday’s pre-RBA levels—meetings through July are flat to 4bps firmer, while those beyond are 2-8bps softer.
• 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”.
• Markets assign an 11% probability to a 25bp rate cut in April, with a cumulative 56bps 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

The US House, controlled by the Republicans, narrowly passed a budget blueprint, which could help Trump's tax cut and other spending related agenda. Other parts of government spending are expected to be cut, while the debt ceiling would also be raised. 

BBG noted: "The House budget would pave the way for $4.5 trillion in tax cuts — about enough to pay for extending the expiring cuts but not enough to also cover Trump’s campaign promises for additional tax relief. The measure would add to the budget deficit despite calling for $2 trillion in overall spending cuts over ten years. The blueprint would raise the US debt limit by $4 trillion, avoiding a potential payment default this summer." 

They added: "The vote doesn’t guarantee an extension of the expiring 2017 Trump tax cuts. The Senate plans to make changes to the House blueprint before passing it and that could raise new objections among House Republicans." 

• There is still some way for this to all become law, but it is seen as a positive step for Trump's agenda. US yields have ticked up from earlier lows, last around +2bps (versus end Tuesday levels) across some of the key benchmarks. The 10yr is back near 4.32%, after earlier being at 4.28%. the USD has recovered some ground as well, last up a touch, to 1285.35 for the BBDXY, USD/JPY has risen back towards 149.25/30.

At the Tokyo lunch break, JGB futures are stronger, +32 compared to the settlement levels, but well off the session’s best levels.

• Cash US tsys are 1-3bps cheaper in today’s Asia-Pac session after yesterday’s solid gains. Earlier headlines crossed that the US house had narrowly passed a US budget resolution, which calls for extended large tax cuts and cuts to Federal spending (see this AP link).
• Cash JGBs are 2-4bps richer across benchmarks. The benchmark 10-year yield is 2.8bps lower at 1.345% versus the cycle high of 1.466% set last week.
• Swaps rates are ~1bp lower. Swap spreads are wider.
• Today, the local calendar will see Leading and Coincident Indices later.