BOJ yield pivot tears on global stocks and bonds: Market recap

(Bloomberg) – Treasury yields rose and U.S. stock futures slid after the Bank of Japan mimicked its central bank peers with a sudden hawkish move that lifted the yen to a four-month high and raised expectations of further political tightening.

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European equities, however, pared some of their early falls, boosted by gains in bank stocks, while US equity futures traded with a slightly weaker bias, after four losing sessions for the underlying indices.

In bond markets, the 10-year Treasury yield rose 8 basis points while bonds from Australia to Germany also sold off. Analysts say more losses are ahead as Japanese investors, major players in US and European debt, now have more incentive to bring cash home.

Many economists now expect the BOJ to raise interest rates next year, joining the Federal Reserve, European Central Bank and others after a decade of extraordinary stimulus.

“Tougher BoJ policy would remove one of the last global anchors that has helped keep borrowing costs low more generally,” Deutsche Bank analysts told clients. , noting that the BOJ’s move came as markets were “already reeling” from the ECB and Fed hawkishness. Last week.

The yen strengthened to 133.21 against the dollar, up more than 3% at one point, while Japan’s 10-year yield hit its highest level since 2015. Bank stocks Japanese, meanwhile, celebrated the BOJ move, gaining as much as 5%. %.

Until now, the BOJ has been an exception among central banks, most of which have quickly tightened policy. Japan’s monetary authority adjusted its yield curve control program to allow 10-year borrowing costs to rise to around 0.5% from the previous upper limit of 0.25%, thwarting forecasts no change at his political meeting.

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The surge in the yen hit the dollar which fell against a basket of currencies, while the yen also posted notable gains against currencies such as the euro and the Australian dollar.

RBC strategist Adam Cole said the moves were amplified by positioning, with most investors still long the dollar versus the yen ahead of the BOJ meeting, meaning “hedging of these short yen positions could take the yen even higher.”

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

Key events this week:

• Housing starts in the United States, Tuesday

• EIA Crude Oil Inventory Report, Wednesday

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

• US GDP, initial jobless claims, US Conf. Council leading index, Thursday

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

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

Shares

• The Stoxx Europe 600 fell 0.5% at 10:20 am London time

• S&P 500 futures fell 0.1%

• Nasdaq 100 futures fell 0.3%

• Dow Jones Industrial Average futures are little changed

• The MSCI Asia-Pacific index fell 0.2%

• The MSCI Emerging Markets Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index fell 0.6%

• The euro rose 0.2% to $1.0627

• The Japanese rose 3.2% to 132.52 to the dollar

• The offshore yuan rose 0.2% to 6.9688 per dollar

• The pound was little changed at $1.2140

Cryptocurrencies

• Bitcoin rose 1.2% to $16,792.89

• Ether rose 2.8% to $1,208.73

Obligations

• The yield on 10-year Treasury bills advanced eight basis points to 3.66%

• Germany’s 10-year yield rose eight basis points to 2.28%

• The UK 10-year yield rose eight basis points to 3.58%

Goods

• Brent rose 0.8% to $80.42 a barrel

• Spot gold rose 1.1% to $1,806.57 an ounce

This story was produced with assistance from Bloomberg Automation.

–With help from Jason Scott and Tasia Sipahutar.

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