Goldman Sachs: Yields At Risk Of Breaching BoJ Tolerance Band

Goldman Sachs note that "the move higher in JGB yields will likely present challenges for the BoJ's yield curve control policy. With yields holding within the bank's tolerance band, the BoJ chose not to make any changes in its purchase pace and maturity profile in its March schedule. While it's possible the bank could make unscheduled changes (or announce fixed rate operations) if JGBs come under further pressure (as we expect they will), that decision could also point towards the BoJ's willingness to tolerate some deviation ahead of a potential widening of its tolerance band in the upcoming policy review. If the BoJ was to change its tolerance band, it would have to strike a careful balance between retaining flexibility in its programs, and allowing too much of a yield response."