BOJ Yield Pivot Rips Across Global Stocks, Bonds: Markets Wrap

(Bloomberg) — Treasury yields rose and global equities fell after the Bank of Japan emulated its central bank peers with a hawkish move that lifted the yen to a four-month high and Sent domestic bond yields 20 basis points higher.

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The move rattled global markets, with European stocks opening nearly 1% lower and U.S. equity futures falling after four days of losses in the underlying indices. Asia’s key equity benchmark is set for a fourth straight decline.

In bond markets, the 10-year Treasury yield rose 10 basis points for a second day, before paring its gains, while bonds from Australia to Germany also sold off. Analysts think more losses are ahead because Japanese investors, big players in US and European debt, now have more incentive to put money in.

The yen strengthened to 133.21 against the dollar, up more than 3% at one point, while Japan’s 10-year yield rose to its highest since 2015.

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“The BoJ’s tighter policy will remove one of the last global anchors helping to keep borrowing costs broadly low,” Deutsche Bank analysts told clients, adding that the BOJ’s move came as markets The ECB and the Fed have “pre-empted” the tyranny. last week.

Until now, the BOJ has been an outlier among central banks, many of which have tightened policy rapidly. Japan’s monetary authority adjusted its yield curve control program to allow 10-year borrowing costs to rise to around 0.5%, compared to the previous upper limit of 0.25%, with forecasts for no change at its policy meeting. does not

The yen’s rise pushed the dollar lower against a basket of currencies, while the yen also posted significant gains against currencies such as the euro and the Australian dollar.

RBC strategist Adam Cole said the moves were broadly positioned, with many investors still long the dollar against the yen ahead of the BOJ meeting, meaning “covering of those yen shorts may push the yen higher.” do.”

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In commodity markets, a weak dollar boosted gold prices, while West Texas Intermediate crude futures were just above $75 a barrel.

Highlights of this week:

  • U.S. housing starts on Tuesday

  • EIA crude oil inventory report, Wednesday

  • US Existing Home Sales, US Conference Board Consumer Confidence, Wednesday

  • US GDP, Initial Unemployment Claims, US Conf. The board’s leading index, Thursday

  • US Consumer Income, New Home Sales, US Durable Goods, PCE Deflator, University of Michigan Consumer Sentiment, Friday

Some of the main moves in the markets as of 7:30 a.m. Tokyo time:

storage

  • The Stoxx Europe 600 was down 0.9% as of 8:38 a.m. London time.

  • S&P 500 futures fell 0.7%

  • Nasdaq 100 futures were down 0.9%

  • The Dow Jones Industrial Average fell 0.5% next

  • The MSCI Asia Pacific index fell 0.3%

  • MSCI’s emerging markets index fell 1.1%

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currency

  • The Bloomberg Dollar Spot Index fell 0.6%

  • The euro rose 0.1% to $1.0619

  • The Japanese yen rose 3.3% to 132.43 per dollar

  • The offshore yuan rose 0.2% to 6.9694 per dollar

  • The British pound was little changed at $1.2154

Cryptocurrency

  • Bitcoin rose 1.3% to $16,795.87

  • Ether rose 2.7% to $1,207.65

Bonds

  • The 10-year Treasury yield rose eight basis points to 3.66%

  • Germany’s 10-year yield rose 10 basis points to 2.30%

  • British 10-year yields rose 14 basis points to 3.64%

commodity

  • Brent crude fell 0.9% to $79.11 a barrel

  • The price of spot gold rose 0.6 percent and reached $1,797.96 an ounce

This story was contributed by Bloomberg Auto.

— Contributed by Jason Scott.

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