Published: Thu, August 02, 2018
Markets | By Erika Turner

Bank of Japan Shift Propels Biggest Bond-Yield Jump in Two Years

Bank of Japan Shift Propels Biggest Bond-Yield Jump in Two Years

Investors await policy meetings of the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

Japan's benchmark 10-year yield sank four basis points to 0.062%, the lowest in more than a week.

MSCI's broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS eased 0.5 percent and Chinese blue chips.CSI300 by 0.7 percent.

MSCI's all-country world stock index .MIWD00000PUS fell 0.37 percent on weakness in the so-called U.S. FAANG group: Facebook FB.O , AMZN.O , Apple AAPL.O , Netflix NFLX.O and Google parent Alphabet GOOGL.O . "Europe's higher weighting to banks/resource will help it vs the U.S". "But the actual outcome showed the BOJ maintaining its short- and long-term yield targets and also its JGB buying amount under new guidance", said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

"Productivity of Japanese firms is relatively low and there is significant room to raise productivity, mainly in the non-manufacturing sector", the BOJ said, adding that Japan's labour productivity is only 60 to 70 percent of the USA level.

The 10-year yield had risen steadily over the last week, reaching a 1½-year high of 0.11 percent on Monday as the market braced for the BOJ potentially considering steps to make its huge monetary stimulus more sustainable.

In commodity markets, oil prices rose as investors remained cautious over the supply outlook, having gained almost 5 percent in price since the middle of July.

USA crude CLc1 added 24 cents to $68.93, while Brent LCOc1 rose 9 cents to $74.38 a barrel.

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However, Nats GM Mike Rizzo held a press conference on Tuesday morning saying the team is not trading Harper. The Nationals (52-53) sit on the periphery of both the National League East and NL wild card races.

The euro tumbled last week after the European Central Bank reaffirmed that rates would stay low through next year's summer.

The Nikkei .N225 turned positive while the dollar gained 0.25 percent against the yen to 111.33 yen JPY= .

Meanwhile, euro zone government bond yields rose across the board after a strong Italian auction boosted demand for Italian debt at the expense of higher-rated markets in the bloc.

It did, however, maintain the short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent by a 7-2 vote.

"In particular, investors will be on the lookout for any changes to the bank's outlook for growth or inflation and any increased concern related to protectionism or trade uncertainty", said Esiner.

The markets are now eyeing the upcomingannouncements by the Bank of Japan (BOJ) that will include their Outlook Report, rate decision, Monetary Policy Statement, and 10-year bond yield target.

To take note of, yields on similarly-dated US Treasuries were also lower, trading down by three basis points to 2.95%.

Gold steadied ahead of this week's Fed meeting, which could give clues about the outlook for USA interest rates and the dollar, key factors for precious metals prices.

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