Saturday, January 28, 2023

US bond returns rise after BOJ surprises with yield curve control shift

by Karen Brettel

Nuevanew yorkDecember 20 – US Treasury yields rose on Tuesday after the Bank of Japan surprised markets by widening its control band on the yield curve, triggering a bond selloff globally.

* In a move described as an attempt to revive the dormant debt market, the boj Decided to allow the 10-year bond yield to move 50 basis points to either side of its 0% target, beyond the previous band of 25 basis points.

* “What was surprising was that they did it so quickly. In fact nobody anticipated that they would widen their band of yield curve control before the middle of next year,” said Benjamin Jeffery, interest rate strategist. BMO Capital Market in New York.

* Investors expected boj Do not make any changes to your yield curve control (YCC) until the resignation of Governor Haruhiko Kuroda in April.

* Still, the central bank kept its yield target unchanged and said it would sharply increase bond purchases, a sign the move was to tighten existing ultra-loose monetary policy rather than withdraw stimulus.

* Yields on benchmark 10-year Treasury notes rose 9 basis points to 3.671% and those on two-year notes rose 3 basis points to 4.291%.

* The yield curve between the two-year and 10-year notes flattened their investments by -62 basis points, but remained deeply negative, signaling concerns about an impending recession.

* Treasury trading volume is expected to be lower this week ahead of the Christmas and New Year holidays, with many traders taking vacations or being risk-averse after closing their balance sheets for the year.

* This week’s US economic focus will be personal consumption expenditure data (pce) will be released on Friday to be followed for more clues on inflation, as investors try to gauge how high the Federal Reserve will raise rates as it battles pressures from prolonged high prices.

Nation World News Desk
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