Central banks’ tightening moves were front and centre again on Tuesday, as the Bank of Japan caught traders on the hop with changes to its policy settings.
That decision saw sovereign bond yields rise in Japan, the UK euro area and US, a greater than 4% drop in the greenback against the Japanese yen and sharp moves in gold and silver futures with the latter boosting precious metals miners’ shares.
As of 1741 GMT, front-dated gold futures on Comex were at their best level since mid-2022 at $1,829.70/oz. while those for silver were bounding higher by almost 5%.
The likes of copper also caught an admittedly much smaller bid, but appeared to boost industrial miners and to offset concerns around the pace of reopening in China and the attendant risk of a surge in infection numbers.
Copper futures were adding 0.37% to $3.7970/lb. on COMEX,
Overnight, the BoJ said it would now allow the yield on the benchmark 10-year sovereign bonds to fluctuate within a band of plus or minus half a percentage point or 50 basis points.
Said and done, the yield on the 10-year JGB snapped 16bp higher to 0.418%, apparently pushing yields on similarly-dated debt around the developed world higher with it.
BoJ Governor Haruhiko Kuroda stressed in his presser that the “basic framework” for policy had not changed.
To be fair, MUFG’s Derek Halpenny said the move was in fact understandable and the fact that yields had fallen back globally.
“That should if sustained limit upward pressure on JGB yields over time,” he explained said.
“Inflation in Japan is also rising at levels not seen since the 1980s with wages at growth rates not seen since 1997.”
Halpenny also pointed how Kuroda had stated that he did not believe a further widening of trading band would be required – although he had said the same on previous occasions.
“USD/JPY could be into the 120’s sooner than we expected.”
Top performing sectors so far today
Electricity 10,534.51 +1.46%
Precious Metals and Mining 10,905.43 +1.36%
Industrial Metals & Mining 7,676.43 +1.32%
Banks 3,233.16 +1.14%
Non-life Insurance 3,259.60 +0.93%
Bottom performing sectors so far today
Automobiles & Parts 1,510.40 -3.15%
Personal Goods 30,072.51 -1.82%
Real Estate Investment Trusts 2,178.32 -1.79%
Leisure Goods 21,013.42 -1.46%
Food Producers 5,570.77 -1.16%
