Technical Analysis

The BOJ conducted two additional rounds of unscheduled bond-purchase operations Thursday

The Bank of Japan buys Japanese Government Bonds (JGBs) as part of its yield curve control (YCC) program to maintain loose monetary policy.

The BOJ buys JGBs in scheduled and unscheduled operations. Unscheduled buys are sometimes referred to as ’emergency’ bond buys. The Bank conducted an unscheduled operation on Wednesday and did so again Thursday. After buying on Thursday morning (Japan time) the BOJ bought more later in the session.

Thus, two ’emergency’ bond buys today:

  • offered to buy unlimited amounts of two- and five-year notes at a fixed yield
  • and also 600 billion yen of one-to-10 year bonds
  • on top of a daily offer to buy 10-year debt at 0.5% (the new top of its current yield target)

Despite announcing the widening of the 10 year JGB band to +/- 0.5% the bank finds itself forced to continue to buy to defend yields. The widening of the band has encouraged traders to speculate that the Bank will be forced to lift the cap further or scrap it completely.

USD/JPY update:

As a catch-up with the People’s Bank of China today:

  • sets USD/ CNY reference rate for today at 6.9793
  • injected 205bn yuan of 7 day reverse repos, with 4 bn yuan maturing today, for a net injection of 201bn yuan in open market operations

While in China, stocks dropped on the session:

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