The Bank of Japan maintained its +/- 50bp tolerance band for the 10 year JGB at Friday's meeting.
The 'but' on this is the Bank said it wanted the YCC policy to be more flexible. This the +/- 0.5% tolerance band is now a 'reference', not a hard limit. . , and said those would be "references" rather than "rigid limits". And that it'd allowed the band to move to 1%. Which left a lot of traders confused. It appears that +/- 1% is now the hard limit, but time will tell.
UBS are confused, like many of us:
- The Bank of Japan "has allowed great flexibility ... in fact the hard line now seems to be 1%."
- "It is an important step towards eventual disbandment. I expect yields will gravitate towards 1% but not get there in a straight line as you're likely to get short covering, domestic buying and the BOJ leaning against it."
Bank of Japan Governor Ueda
