JP Morgan on the BOJ and below target JGB yields - something's gotta give
JPM say the Bank of Japan may allow further falls in JGB yields even after the 10 year dropped to its lowest since 2016 earlier today.
- minus 0.255%, which is their lowest since July 2016
The BOJ then cut its purchases of JGBs at the operation today. JPM says the only small cut is reflective of the difficulties the BOJ faces. It's hard for the BOJ central bank to achieve all its goals, one of which is holding yields (on the 10-year yield) in a range around 20bps within zero.
At some point, say JPM, the BOJ will have to give up something up. That could be allowing the yiled to decline belwo the current target.
(which it already is)