JGB Market Groans
JGB market can accommodate the size of the BoJ’s ambitions. USDJPY managed to break to a new multi-year high of 97.20, but surrendered gains after trading in JGB futures was temporarily halted. JGB yields gyrated widely in illiquid conditions in the wake of Thursday’s aggressive easing by the BoJ. The 10y yield opened sharply lower and then swung within a 32.5 bp-65 bp range – at one point climbing back above levels which prevailed before Thursday’s BoJ announcement. Meanwhile BoJ Governor Kuroda had his governorship reconfirmed by both houses of parliament. The original confirmation several weeks ago authorised Kuroda to complete the remainder of Shirakawa’s term (following his resignation three weeks early). The reconfirmation overnight now allows Kuroda to begin his five-year term proper on April 9th. Although the votes were largely just a formality, there was always a very small risk that Thursday’s bold easing might have ruffled some parliamentary feathers. That risk has now vanished.
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UBS