BoJ announces unexpected turnaround for 10-year bonds

🚩After many years of ultra-loose policies, the BoJ joins the Hawkish trend of Central Banks after widening the fluctuation band of long-term bond yields. the BoJ decided to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point band. However, the BoJ would increase monthly purchases of JGBs to 9 trillion yen per month from the previous 7.3 trillion yen.

🚩This news has been a major setback for the world’s main stock markets (most of them start the day in the red), as the BoJ was the «last bastion» of the Central Banks of the world’s main economies that maintained expansionary monetary policies. This poor performance comes on top of last week’s poor results following the decisions by the FED and the ECB to keep interest rates high for a longer period.

🚩On the other hand, Japan has seen a strong appreciation of the Yen against the dollar to a four-month low of 132.68 yen (the dollar has fallen more than 3%), and an increase in 10-year bond yields (The 10-year JGB yield briefly spiked to 0.460%). However, the worst hit was the Nikkei, which fell by 2.5% after the news.

​Source: Financial Times