BoJ: Further willingness to re-steepen yield curves – Danske Bank

Danske Bank analysts note that yesterday the BoJ signalled further willingness to re-steepen yield curves, as the October purchase plan under the QE programme showed cuts to purchases in maturities longer than 3 years and even showed a potential end to purchases above 25y maturities.

Key Quotes

“On top of this, Japan's Government Pension Investment Fund in a statement this morning said that it would re-categorize FX hedged foreign currency bond holdings into domestic debt, effectively freeing up JPY 1.3tn, that the fund can now invest in foreign debt.”

“JGB yields are generally higher this morning as the curve steepens 5-6bp 2s10s. The 2s10s curve is at its steepest level since February. It will be interesting to see whether the recent curve steepening can remain intact despite a lack of inflation and growth expectations.”