[MARKET ANALYSIS] Fixed income contained, with focus now on the BoJ and its outlook report
- UST Futures oscillate in a narrow 3 tick range, after benchmarks were pressured in Monday’s session as energy prices rose. Despite US officials highlighting US President Trump’s disappointment with Iran’s proposal, USTs remain unmoved.
- Bund Futures are softer, holding at the lower end of their 125.24-125.26 range. Newsflow has been light, driving German debt, with price action continuing to be energy-dependent.
- JGB Futures outperform their peers, albeit within narrow ranges, ahead of the BoJ announcement. Focus will be on the outlook report, in which the Bank is expected to sharply increase its price forecast and potentially cut its growth outlook.
Context
The fixed income market appears contained as traders await the Bank of Japan's upcoming outlook report, which is anticipated to show a significant increase in price forecasts alongside a potential cut in growth outlook. This has caused Japanese Government Bonds (JGBs) to outperform their peers, while U.S. Treasury and Bund futures remain relatively stable but pressured by rising energy prices. The implications here could shift the sentiment around rates, particularly in the context of global inflation forecasts and central bank policy directions.
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