Disappointing BOJ Bond Buying Casts Doubt Over Policy: Analysts
(Bloomberg) -- Bank of Japan disappoints investors who expected a bigger increase in bond purchases after 10-year yield climbed above the perceived ceiling of 0.1% Thursday.
- Investors are questioning BOJ policy makers’ resolve to keep 10-year yields “around” zero percent and control yield curve, according to analysts
- BOJ offers to buy 450b yen of 5-to-10-year govt bonds from secondary market; while the amount is more than the 410b yen initial plan, it was the same as its last purchase on Jan. 27
- Yield on current 10-year yield climbs as much as 4bps to 0.150%, highest since January 2016
- USD/JPY drops as much as 0.3% to 112.52 after briefly spiking 0.3% higher to 113.14 after the announcement
- SMBC Trust Bank (Simon Pianfetti, a senior manager in the market solutions department)
- The increase was not enough
- The market will test the BOJ further
- Nomura (Peter Dragicevich, FX strategist)
- Market looks to have been looking for a broader spectrum of purchase increases to reaffirm BOJ’s commitment
- Market continues to test BOJ’s resolve with 10-year yields up a couple more basis points
- But as BOJ minutes from December policy meeting noted this morning, some board members have called for flexibility in meeting the target
- SMBC Nikko Securities (Souichi Takeyama, rates strategist)
- BOJ has shown its willingness to contain rise in yields but seems to have failed to communicate well with markets
- There were some expectations that BOJ would boost purchase amount more or may buy super-long-term bonds
- With none of these expectations met, there is speculation BOJ isn’t serious about stopping rise in yields
- The central bank may also be taking into account impact of its bond operations on the currency
- Barclays (Naoya Oshikubo, rates strategist)
- People expected BOJ to buy more, even in the zone of more than 10 years
- The disappointing outcome accelerated the selloff in bonds
- National Australia Bank (Ray Attrill, global co-head of FX strategy)
- “I would be confident” that BOJ isn’t abandoning its yield-curve-control policy and that central bank will be more aggressive in coming days if it needs to be
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
Tickers 8301 JP (Bank of Japan)
People Naoya Oshikubo (Barclays PLC)
Peter Dragicevich (Nomura Holdings Inc)
Ray Attrill (National Australia Bank Ltd)
Simon Pianfetti (Sumitomo Mitsui Trust Holdings Inc)
Souichi Takeyama (SMBC Nikko Securities Inc)
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