(1) The Bank of Japan intervened in the Japanese government bond market for the fifth time this month on Friday, after the 10-year yield rose to a new 10-year high as the Bank of Japan battled market forces against the backdrop of soaring U.S. Treasury yields.
(2) Japan's 10-year yields started today by climbing to a high of 0.845% since July 2013, having also touched them the previous day.
(3) But yields retreated immediately after the Bank of Japan's announcement, the latest 0.83%, 1.0 basis points below Thursday's close.
(4) Under the Yield Curve Control (YCC) policy, the Bank of Japan set the upper limit on the yield of 10-year government bonds at 1%, and unexpectedly doubled the upper limit at the end of July. However, the Bank of Japan has signaled that it will not tolerate a sharp rise in yields to the ceiling, and has repeatedly intervened to prevent it.
(5) "The Bank of Japan is not trying to place a limit on yields here. The signal is that it should be gradual rather than rushed," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management, "I don't know if the BOJ is happy with this level, but 0.845% is still well below 1%. There is still room for upside. ”
(6) The Bank of Japan provided five-year mortgages to financial institutions in this latest operation, the second time this month to use this instrument. Another regular option for central banks is additional bond purchases, which have been done three times this month, including earlier this week.