Yowza!, cool headline from the Nikkei today: Central bank plays trump card early to shock markets straight
Referring to the Bank of Japan action last week offering to buy bonds at a fixed yield to curb rising interest rates
(You might recall the action, its putting into practices the new BOJ policy:
- BOJ offers to buy unlmtd amt of JGBs (1 to 3yr maturity, yield 0.02% above prior close)
- BOJ's Kuroda says will continue to use fixed-rate operations as needed)
The Nikkei article is a bit or a recap:
- A call went out for two- and five-year JGBs to address the rapid surge in short- and medium-term bond yields ... There were no takers: The offered yields were higher than going market rates, meaning the offered prices were lower, sending wise traders elsewhere
- But the conditions of the operation sent a strong signal as to how high the central bank will let rates go before stepping in. Yields slid across all maturities after the move was announced.
- Since then, "interest rates' upward climb has been weakened somewhat," Takako Masai, a member of the bank's policy board, told reporters after a speech Monday. "I get the sense that the purpose of fixed-rate operations has been well conveyed to markets."
With the USD strength at present (and therefore yen weakness) the BOJ is on a roll, events are proceeding in their favour.