Will The BoJ Step In Again?

Focus will be on the longer end of the JGB curve once again, given the steepening impetus witnessed in the likes of Gilts & Tsys on Tuesday, with super-long JGB yields already extending to fresh cycle highs on Tuesday.

• That will leave participants on the lookout for further rounds of unscheduled BoJ Rinban operations after the BoJ stepped in to buy 5- to 25-Year JGBs on Tuesday, in a bid to defend its YCC mechanism.
• A reminder that Meiji Yasuda, a domestic life insurer, flagged that it may buy fewer JGBs than planned in the current FY owing to BoJ policy uncertainty linked to the end of BoJ Governor Kuroda’s term atop the central bank. Ongoing market volatility and the recent run higher in yields will also be dissuading others from deploying capital, with the likes of the 10-/30-Year curve running to multi-year owing to spill over from wider global FI markets & the relative lack of BoJ control of yields beyond the 10-Year point (with paper out to 10s anchored by BoJ YCC).
• Today’s local docket is limited, with the outdated minutes from the BoJ’s July meeting and lower tier domestic data due.