Daily Flows & Insights – BOJ Shifts to a Looser YCC Policy

Daily Flows

  • 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.
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Curve Team
Jack Pedersen