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CADJPY: New low in 2022 ahead of Canadian CPI releases


Yesterday, Bank of Japan Unexpectedly, it was modified Control of the yield curve (YCC), increasing its target for 10-year bonds yields 0.5% (previously 0.25%). The move reflects the central bank’s move towards policy normalisation, while also testing the market’s reaction to its exit from ultra-easy policy. The central bank later said that it was “only fine-tuning rather than withdrawing stimulus” and that it would “still increase the size of its bond purchases significantly”, but this still did not stop the market from whipping up a wave of volatility. The spread between the Dollar (Yen) and the Dollar (Dollar) could shrink if the Bank of Japan becomes less dovish than before. This will allow foreign capital to return to Japan with a greater appreciation of the yen.

Figure 1: Japanese Multi-Tranch Bonds and Yields. Source:World Government Bonds

After the announcement, the Japanese bond markets reacted strongly. The 7/8-year bond yields increased by almost 20 bps compared to the previous month; the 6/15-year yields rose more than 15 bps; and the 10/20-year yields rose more than 14 bps. [10-yr highest since 2015]30-yr yields grew by over 7 bps, while 4- and 5-year yields grew by over 6 bps. The long-end yields (15-20, 30-, and…

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