Japan's 10-year bond yields rise to its highest levels since January 2016
And that's the highest level yields are at since the BOJ began its negative interest rate policy. In July, the BOJ said it would allow for 10-year yields to move around double past its range of 0.10% - which means that yields could move towards 0.20%. However, on 2 August when yields started inching higher to 0.14% they intervened and bought up ¥400 billion worth of debt to limit yields from soaring higher.
That kept investors a bit nervous about potential further interventions but yields steadily moved higher thereafter. As it would seem, the BOJ appears to be quite comfortable with allowing yields move beyond the 0.14% level but as long as it does so in an orderly and calm manner.
Although there is a bit of a spike today to 0.16%, the BOJ is not in the market just yet to pin down the advance seen in yields so far today.
That's a signal that the central bank is looking to scale back on its powerful easing monetary policy a little bit more and that will help out with providing added support to the yen in the medium-term.
Kuroda and the BOJ aren't going to turn hawkish overnight but these early steps are something worth picking up on as it shows their level of comfort in allowing their easing policies to come off. And that will only help to promote more confidence in the Japanese bond market over time.
One thing worth looking out for is the 30-year yields:
It currently sits at 0.95% but the key level to look out for will be the 1.00% threshold. If yields rise to that level, it is expected to give the yen an added backing as funds may potentially be moving back into the currency from higher-yielding overseas debt.
