• Meanwhile in markets, Friday’s CPI shocker is still sending shockwaves across the broad spectrum of markets. Drawing all the attention is the JGB market, where the 10-year yield has breached the Bank of Japan’s 10-year yield target of 0.25 percent. On our Bloomberg, which may not have the best and freshest prices available, the 10y was quoted at 0.254 percent at its high point. The Bank of Japan, which has its monetary policy meeting Friday this week, announced it will buy another 500 billion yen in five to ten year JGBs to stem the advance in yields.
  • Now, we are no BOJ-watchers. But we can definitely remember the BOJ making prior policy U-turns (on negative rates for example) after plenty of hard denials. Put differently, there will probably no slow or gradual change in verbal guidance or leaks to the press (hello ECB sources!) when a major policy U-turn is imminent. So, our tourist view is that the yield target will go. And it might very well happen on Friday. Because that’s pretty much the only thing the Japanese can do to halt the slide in the yen. Barring capital controls we should add.


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