The Bank of Japan's decision on Tuesday to adjust its policy band for bond yields, a step it said was aimed at improving market functioning, is instead drawing speculators deeper into betting on bigger changes by the developed world's last dove.
at its policy review to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point band.
"Knowing that the BOJ is more flexible... I think it tells you that you should stay in these short positions." When trading resumed in Japan, 10-year JGB yields shot towards their new ceiling and futures fell so fast it triggered a circuit breaker suspending trade. Those swaps - another market measure of interest rate expectations - tracked bond yields until early this year.Japan has become ever more of an monetary policy outlier this year as inflation has forced every other big central bank to stop buying bonds and start tightening, and it has been openly challenged by investors.
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