- The Australian 10-year bond yield has reached a yield to maturity (YTM) of 5.00% this morning.
- While Australia’s credit profile is skewed towards short-term variable reference rates, increases in the 10-year bond yield still results in elevated borrowing costs and tighter financial conditions.
- Yesterday, 9-month term deposits were being offered by environmentally friendly banks at rates upwards of 5.30%.
- With tighter liquidity conditions observed, NCD margins have increased to +45 basis points for 3 months.
BOJ Shifts to a Looser YCC Policy
- BOJ eases grip on government bond yields, maintains negative interest rates, leading to yen value decline.
- BOJ adopts a more flexible approach to 10-year bond yield control, raising inflation forecasts but emphasising the need for accommodative policy.
- Investors left confused by BOJ’s policy stance, as Japan’s central bank remains unique in maintaining negative interest rates.
- Potential shift away from YCC control removes a global market anchor, resulting in higher borrowing costs for Japan and foreign investment.