UBS on Bank of Japan Yield Curve Control – ceiling seems to be 1%

<p>The Bank of Japan maintained its +/- 50bp tolerance band for the 10 year JGB at Friday's meeting.</p><p>The 'but' on this is the Bank said it wanted the YCC policy to be more flexible. This the +/- 0.5% tolerance band is now a 'reference', not a hard limit. . , and said those would be "references" rather than "rigid limits". And that it'd allowed the band to move to 1%. Which left a lot of traders confused. It appears that +/- 1% is now the hard limit, but time will tell. </p><p>UBS are confused, like many of us:</p><ul><li>The Bank of Japan "has allowed great flexibility … in fact the hard line now seems to be 1%."</li><li>

"It is an important step towards eventual disbandment. I expect yields will gravitate towards 1% but not get there in a straight line as you're likely to get short covering, domestic buying and the BOJ leaning against it."</li></ul><p>Bank of Japan Governor Ueda </p>

This article was written by Eamonn Sheridan at www.forexlive.com.