- "Bank of Japan Gov. Kuroda shocks markets by adjusting the yield curve control program"
- Osaka Exchange halts JGB futures trade - limit down
- Bank of Japan pivot bombshell - widening 10yr JGB band to 0.5% (from 0.25). Yen up
- BOJ leaves policy unchanged, as expected (but widens band of YCC)
- Japan finance minister Suzuki says there has been no decision on revising the BOJ deal
- The World Bank has cut its China 2023 GDP forecast to 4.3% (from 4.5%)
- NZD strength against the AUD driven by higher NZ/Australia rate spreads - to reverse
- Morgan Stanley warn that 2023 stockmarket earnings recession could be similar to 2008-09
- Hong Kong and China mainland stocks falling - property sector in particular
- PBOC LPR setting: 1-year and 5-year both unchanged
- PBOC sets USD/ CNY reference rate for today at 6.9861
- USD/JPY rising ahead of the Bank of Japan meeting outcome (no change to policy expected)
- RBA December Minutes: Further rates hikes will likely be needed to balance supply & demand
- New Zealand December business confidence -70.2 (prior-57.1)
- Reserve Bank of Australia December meeting minutes are due at 0030 GMT
- UK extends support for high loan-to-value mortgages for a year
- Reuters report: "U.S. poised to become net exporter of crude oil in 2023"
- Australia weekly consumer confidence 82.5 (prior 82.9)
- Forexlive Americas FX news wrap: Home builder sentiment worsens. USD choppy on flows
- Bank of Canada moves to "enhance the effectiveness of its monetary policy implementation"
- JPMorgan cuts its price target on Apple (AAPL) to US$190 from US$200, still like the stock
- Trade ideas thread - Tuesday, 20 December 2022
- Another down day for US equities
You thought the World Cup final was exciting?
The Bank of Japan dropped its long-awaited pivot bombshell into the market today. While the initial reports out of the BOJ statement were that the two main policy planks:
- a -0.1% target for short-term rates
- and a cap for the 10-year bond yield around 0%
remained unchanged, as indeed they did, the shock to markets came in the detail:
- that the BOJ will expand the band around its 10 year yield target to 0.5% above and below (from 0.25%)
This is a change to BOJ Yield Curve Control (YCC), a long-, long-awaited one. It’s a small change, but its significant. In effect it’s a slight lessening of easy policy. Very slight. But, given the market had basically settled on expecting no change from the Bank until Kuroda’s term expires in April 2023 it slammed markets.
USD/JPY collapsed, from around 137.30 prior to the statement to lows circa 133.13.
The Bank of Japan dropped the pivot bombshell in the middle of the Tokyo lunch break. Physical stock trade was shut for the lunch break. Futures trade continued, though, down over 4%. As I post Japan’s exchange has reopened for afternoon trade, the Nikkei shed over 2%. Equity indexes elsewhere around the globe fell also; ES and NQ took a hit.
Also as I post the yield on the 10 year JGB has jumped to 0.455%, its highest since 2015. The Osaka Exchange has halted 10yr JGB futures trade, limit down. Yields in other countries rising also.
As a counter to the YCC ‘tweak’ (as some are describing it … sheesh, biggest tweak ever) the BOJ said it’ll be increasing purchases of JGBs to 9tln/month.
In widening the band the BOJ said:
- “the functioning of bond markets has deteriorated... If these market conditions persist, this could have a negative impact on financial conditions."
Elsewhere:
- the People’s Bank of China left the 1- and 5-year Loan Prime Rates (LPR) unchanged, as widely expected
- RBA minutes of the December meeting were strogly suggestive of further rate hikes to come in Australia
- the Bank of Japan pivot sent EUR, AUD, GBP and others on a wild ride as yen crosses responded
