The BoJ's move should lead to upward pressure on global government-bond yields and an appreciating yen, while hurting the appeal of Treasurys, analysts said.
It was a development that seemed to come out of nowhere on Thursday, nudging 10- and 30-year Treasury yields above 4% and taking the steam out of U.S. stocks despite a round of resilient economic data.A news report by Nikkei about a likely tweak to the Bank of Japan’s yield-curve control was all it took for investors to realize that the world’s last remaining floor on interest rates might be shifting.
“The Bank of Japan seems to have effectively ended yield curve control without making a big splash in financial markets” on Friday, “but we wouldn’t rule out further effects — on Japan’s markets and those around the world — just yet,” Matthews wrote in a note. “For so long, Japanese government bonds have been totally anchored, acting as a floor for rates worldwide. The BoJ, which is the biggest holder of Japanese government bonds, has kept short-term rates incredibly low while allowing yield-curve control to impact longer-term rates,” said Will Compernolle, a macro strategist at FHN Financial in New York.
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