Japan Economic & Financial Weekly

Did surprise cut to BoJ purchases lift market targets for JGB yields?

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Did surprise cut to BoJ purchases lift market targets for JGB yields?

Long-term and superlong-term JGB yield scenarios for May 20-24

The 10-year JGB yield treads water with an upward bias this week. There are growing concerns about weak results at the 40-year offering on May 22. The market trades nervously ahead of the BoJ buying operation on May 23 amid worries of further cuts to its purchases. If the Bank reduces its purchases, the 10-year JGB yield reflexively moves a little higher but then declines on dip-buying. On the other hand, it follows the 10-year UST yield lower if the latter tests the downside on expectations of a Fed rate cut before the end of 2024. The 30-year JGB yield trades at a level that keeps the 10s30s JGB spread above 110bp.

Forecast range:
10-year JGB yield:  0.910%–0.970%
30-year JGB yield: 2.010%–2.080%

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