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Aug 14 - 02:55 PM

BofA Anticipates BoJ Action if 10yr JGB Yield Reaches 75bp

By eFXdata  —  Aug 14 - 01:30 PM

Bank of America (BofA) delves into the statements from BoJ Governor, Kazuo Ueda, implying potential central bank interventions if the 10-year JGB yield nears 75bp. This comes even after Ueda previously indicated that the bank would not step in for fundamental reasons.

Key Points:

  1. Governor Ueda's Stance: BoJ Governor, Kazuo Ueda, mentioned in his post-MPM press conference last July that the central bank wouldn’t address a rise in JGB yields if driven by market fundamentals.

  2. Establishing Fair Value: BofA's report aims to decipher the fair value for the 10-year JGB yield rooted in fundamentals. Their findings, even amidst prevailing uncertainties, pinpoint the fair value range between 75-106bp.

  3. Potential BoJ Moves: If the 10-year JGB yield edges closer to the 75bp mark, BofA foresees the BoJ possibly implementing fixed-rate purchase operations spanning nonconsecutive days and initiating funds-supplying operations against pooled collateral.

Summary: BofA's recent analysis on the 10-year JGB yield suggests a potential intervention by the Bank of Japan if yields approach the 75bp threshold. This is despite Governor Ueda's earlier assertion that the bank would remain hands-off for fundamental yield movements. The analysis lays down a fair value range of 75-106bp, indicating that the BoJ may be readying measures to manage the yields within this bracket.

BofA Global Research


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