HALISTER1: BOJ May Let Yield Rise Beyond 0%; Possible This Week: Barclays

BOJ May Let Yield Rise Beyond 0%; Possible This Week: Barclays

(Bloomberg) -- It is possible that Bank of Japan will allow 10-year JGB yield to rise beyond zero% as real interest rates are falling while break-even rates are on an upward path, says Naoya Oshikubo, Tokyo-based rates strategist at Barclays.
  • Investors are watching how far BOJ will let yields climb;
    • Close attention being paid by market participants to whether central bank will try to halt increase in 10- year yield at zero or will allow it to rise beyond that level
  • BOJ may use fixed-rate JGB purchase operation in order to to halt the increase in yields
  • Strong demand is expected at 0%, making it difficult for the rate to move to positive territory without further increase in U.S. Treasury yields and USD/JPY;
    • However, cannot deny possibility of seeing it before the end of this week
  • Yield on 10-year yield adds 1.5bps to 0%, highest since Sept. 21 when benchmark yield touched 0.005%
  • NOTE: BOJ introduced yield curve control policy on Sept. 21
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Naoya Oshikubo (Barclays PLC)

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