Goldman Sachs: Post-BoJ Relief Likely Temporary

Goldman Sachs write “the BoJ pushed back against anticipation of additional policy changes, maintaining the status quo across existing policy parameters and extending the duration of fund-supplying operations.”

• “The outcome prompted a meaningful rally in the belly of the JGB curve and supported what had been already bullish price action in global rates markets in recent weeks.”
• “Near term, we anticipate a period of relaxation in positioning that had pushed JPY yields higher, swap spreads wider, and amplified distortion along the yield curve. This is likely to prove temporary, however, as risks around global yields looks increasingly skewed to the upside from current levels; fading recession risks as the year progresses should bring renewed pressure from abroad.”
• “Domestic inflation dynamics are another source of pressure that may force either further BoJ actions to keep JGB yields from resuming an uptrend or a policy change.”