International Investors Start To Test BoJ

The latest round of weekly international security flow data saw limited flows on the part of Japanese participants, with the real eye catcher coming in the form of the sales of Japanese bonds on the part of international investors (via the largest round of weekly net sales seen since the record level lodged in June), which suggests that offshore participants are willing to test the BoJ’s resolve when it comes to defending its existing YCC settings.

• The re-widening of longer dated LCH/JSCC swap spreads was a sign that international investors had started to speculate via such positions, albeit with reduced appetite vs. what was seen in June, given outright super-long spread and LCH/JSCC spread levels.
• A reminder that the Japanese authorities seemingly upped their verbal intervention to rate checking via the BoJ on Wednesday, with Japan’s energy importer status and then relative monetary policy differences weighing on the JPY through ’22.
• The government’s apparent want to limit further JPY weakness remains troubled by the BoJ’s clear reluctance to deviate from its on-hold stance, giving international investors a focal point to target. 10-Year JGB yields operate around the BoJ’s 0.25% limit at typing.

Source: MNI - Market News/Bloomberg/Japanese Ministry Of Finance