Friday, February 3, 2017

Watching Japan: "BoJ attempts a bit of yield curve control"

Following on Monday's "Japan's Cheap Money Era May Be Coming To An End".
From FT Alphaville:

Snap AV: BoJ attempts a bit of yield curve control
JPY and 10yr all over the place this morning as the Bank of Japan stepped in and asserted some of that famed “yield control”.

As Deutsche say, “markets had viewed 0.1% as the upper end of the BoJ’s “around 0%” 10y yield target, and believe the BoJ might use its JGB purchasing operations to show its determination to cap the 10y yield.”

It did but only after some initial unconvincing fiddling.

Here’s CitiFX with an update this morning, with our emphasis. If you’re in a rush just do a ctrl-f for “unlimited”:

As markets in Asia opened today our FX desk received a lot of questions on BoJ’s action in the JGB market.

· This is after the yield on the benchmark 10y JGB gained yesterday; to briefly touch 0.115% – its highest level since January 2016, when the BoJ announced its negative rates policy.
· The two main focus areas:
– If the BoJ increase 5-10y purchase again from 410bn to 450bn: Last week the BoJ had surprisingly increased the purchase but the purchase plan announced on 31st Jan for the month of February said the target remained at 410bn....