Morning Bid: Sayonara, cheap money
1:36 am Tuesday, December 20th, 2022
A look at the day ahead in European and global markets from Ankur Banerjee
And so the last dove prepares to fly the coop, and the end of an era of super-cheap liquidity comes into view.
The Bank of Japan has loosened its yield-curve control, the 10-year yield has surged toward its new ceiling and pulled the yen with it. Japanese government bond futures fell fast enough to trip a circuit breaker in Tokyo and the Nikkei lost 2.8%.
Soon-to-be-outgoing Governor Haruhiko Kuroda is due to speak at 0630 GMT to further explain himself. But markets have already taken the move as a step toward Japan extricating itself from yield curve control and near-zero interest rates.
And that would bring down the curtains for the last bastion of super-easy policy in developed markets, leaving investors to ponder a higher-for-longer world.
Asian shares spiked lower, the yen reached a four-month high on the dollar, while the yields on the 10-year Japanese bond hovered at 0.40% – just under their new roof of 0.5%. U.S. Treasury yields also jumped.
GRAPHIC: BOJ widens band around its yield cap (https://www.reuters.com/graphics/JAPAN-ECONOMY/BOJ/lgvdkkamdpo/chart.png)
Key developments that could influence markets on Tuesday :
Economic events: Germany producer prices for November, U.S. building permits and housing starts
(Reporting by Ankur Banerjee; Editing by Tom Westbrook and Jacqueline Wong)
