BOJ’s Fine-Tuning of Bond Purchases Restrains Volatility: SBI
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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8301 JP (Bank of Japan)
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Eiji Dohke (SoftBank Group Corp)
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UUID: 7947283
(Bloomberg) -- The Bank of Japan may risk further damping market volatility when it fine-tunes its bond purchase operations, according to Eiji Dohke, chief bond strategist at SBI Securities in Tokyo.
- BOJ’s yield curve control is functioning but operations in response to small changes in yields risk a further reduction of bond market volatility
- NOTE: BOJ offers to buy 440b yen in 5- to-10 year bonds vs 470b prior
- 10-year JGB yield falls 0.5bp to 0.04% on Wednesday, lowest since June 7, after the purchase
- The reduction in 5-to-10 year zone may spark speculation that the BOJ won’t tolerate 10-year yield falling below 0.05%
- Could potentially raise the range markets perceive the BOJ as allowing to 0.05-0.1% from zero-0.1%
- NOTE: BOJ aims to keep 10-year yield at around zero percent
- BOJ can control yield even after lowering purchases if external environment is favorable amid shrinking availability of JGBs
- At the same time, fine-tuning operations undermine market mechanism and risk failing to send warning signal over fiscal woes
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
8301 JP (Bank of Japan)
People
Eiji Dohke (SoftBank Group Corp)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283