February 2, 2018

BoJ Offers To Buy Unlimited Debt, Boosts POMO In Panic Response To Surging Rates

Kuroda is losing kontrol

After unexpectedly boosting its bond-buying in the 3-5Y segment of the JGB curve on Tuesday, as global bond yields break ever higher, it appears The Bank of Japan is realizing it is losing control of its yield curve and today unleashed a double-whammy to stifle the bond bears...

Whammy 1 - BoJ offers to buy unlimited 10Y notes at 11bps.

Result - a 0.5bps drop in the JGB yield!!

Let's hold back on the 'mission accomplished' celebration for now, because in a rerun of the failed attempt from Tuesday, when the BOJ boosted its 3-to-5 year bond purchase operation (aka POMO) from 300BN to 330BN yen, today it proceeded with...

Whammy 2 - BoJ increasese its usual POMO to 450 billion yen from 410 billion in the 5Y and 10Y range of the curve.

Result: a very brief weakening of the JPY followed by a 'policy error-like' drop in USDJPY as the Yen spiked now that the market demands even more.

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