Market Extra: Asia weighs on Treasury market as traders assess possible BOJ shift, China reopening

by | Dec 19, 2022 | Stock Market

In one of 2022’s more unusual U.S. bond-trading sessions, it wasn’t only the Federal Reserve or European Central Bank weighing on the roughly $24 trillion Treasury market on Monday, but also concerns about the Bank of Japan.The BOJ, the last dovish major central bank left in the world, may be moving closer to a hawkish pivot, analysts said. Over the weekend, the Kyodo News agency reported that Japan’s Prime Minister Fumio Kishida is looking to make the country’s 2% inflation target more flexible. As soon as next spring, Kishida could discuss details of how to revise the government’s decade-long accord with the BOJ on the 2% target after a new central-bank governor succeeds Haruhiko Kuroda, whose term ends in April, according to Kyodo.Read: Time Might Run Out on Japan’s Low-Rate PolicyTraders disagreed on Monday over how much impact the BOJ developments had on Treasurys, though chatter about a coming policy shift added to an overall sense of global central banks heading higher for longer with interest rates. Treasurys sold off, led by activity in seven-year notes through 30-year bonds, which pushed their yields up by at least 10 basis points each. The benchmark 10-
TMUBMUSD10Y,
3.586%
and 30-year rates
TMUBMUSD30Y,
3.634%
jumped to 3.58% and 3.62%, respectively, as the bond market flipped back to concerns about higher interest rates, plus inflation, and away from fears of a recession.  Taken together with China’s sudden reopening following a swift rollback of many COVID restriction …

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