MUFG reports improving demand for JGBs and a high probability of BoJ and ECB rate hikes in June to counter energy-driven inflation risks. However, USD/JPY remains pressured by high US yields and hawkish Fed sentiment.
Key Takeaways
- 1.Underlying demand for JGBs is improving, evidenced by higher bid-to-cover ratios in 40-year and 20-year auctions and increased buying from lifers and regional banks.
- 2.A Bank of Japan (BoJ) rate hike in June is considered very likely (19bps priced), driven by inflation risks from energy shocks and wage growth changes.
- 3.The ECB is signaling a 25bp policy rate hike on June 11th, with officials emphasizing the need to address energy-driven inflation projections.
Table of Contents
- JGB demand picks up but US yield again key for USD/JPY
- JPY: Yen stable after solid JGB auction as Ueda highlights inflation risks
- EUR/USD REMAINS CONSOLIDATED WELL ABOVE 10-YEAR AVERAGE
- EUR: The message is clear
- KEY RELEASES AND EVENTS
Document Preview
Access the Full Report
Get unlimited access to institutional research reports with a 14-day free trial.
Authors
Derek Halpenny
Securities
USDJPYEURUSDJapanese Government Bonds (JGBs)German 2-year yield
Themes
Central Bank HawkishnessEnergy Shock Pass-through
Regions
Asia PacificNorth AmericaEuropeJapanUnited StatesNew Zealand