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.