(Bloomberg) — Treasury yields rose and global stocks fell as the Bank of Japan followed its central bank peers in pushing the yen to its highest level in more than four months and sending domestic bond yields 20 basis points higher.
Most Read from Bloomberg
The move shocked global markets, with European shares opening nearly 1% lower and US stock futures falling after four days of losses in the underlying indices. Asia’s main equity benchmark extended its fourth straight decline.
In bond markets, the 10-year Treasury yield rose as much as 10 basis points for a second day. Analysts expect more losses to come as Japanese investors, who are major players in U.S. and European debt, have more incentive to bring money home.
The yen strengthened to 133.21 against the dollar, rising more than 3% at one point, while Japan’s 10-year yield rose to its highest since 2015.
“Tighter BoJ policy will remove one of the last global anchors helping to keep borrowing costs broadly low,” Deutsche Bank analysts told clients, adding that the BOJ move comes as markets are “already reeling” from the hawks of the ECB and Fed. Last week.
Until now, the BOJ has been an outlet for central banks, most of which have been quick to tighten policy. The Monetary Authority of Japan adjusted its yield curve control program, allowing 10-year borrowing costs to rise to 0.5%, against the previous 0.25% ceiling, leaving it unchanged at its policy meeting.
The yen’s surge pushed the dollar, which fell against a basket of currencies, while the yen posted significant gains against currencies such as the euro and Australian dollar.
RBC strategist Adam Cole said ahead of the BOJ meeting that most investors were still holding the yen against the dollar, meaning “closing these yen shorts would mean the yen would be even higher.”
In commodity markets, a weaker dollar lifted gold prices, while West Texas Intermediate crude futures were steady above $75 a barrel.
Highlights of this week:
-
US housing starts, Tuesday
-
EIA crude oil inventories report, Wednesday
-
Existing home sales in the US, American Conference Board Consumer Confidence, Wednesday
-
US GDP, Initial Unemployment Claims, US Conf. Board leading index, Thursday
-
US consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, Fri
Some key moves in the markets as of 7:30 am Tokyo time:
Shares
-
The Stoxx Europe 600 was down 0.9% as of 8:38 a.m. London time.
-
S&P 500 futures fell 0.7%
-
Nasdaq 100 futures fell 0.9%
-
Futures for the Dow Jones industrial average fell 0.5%
-
The MSCI Asia Pacific index fell 0.3%
-
The MSCI emerging market index fell 1.1%
Coins
-
The Bloomberg Dollar Spot Index fell 0.6%
-
The euro was up 0.1% at $1.0619
-
The Japanese yen rose 3.3% to 132.43 per dollar
-
The offshore yuan was up 0.2% at 6.9694 per dollar
-
The British pound was little changed at $1.2154
Cryptocurrencies
-
Bitcoin rose 1.3% to $16,795.87
-
Ether rose 2.7% to $1,207.65
Bonds
-
The yield on 10-year Treasuries rose eight basis points to 3.66%
-
Germany’s 10-year yield rose 10 basis points to 2.30%
-
Britain’s 10-year yield rose 14 basis points to 3.64%
materials
-
Brent crude oil fell 0.9% to $79.11 a barrel
-
Spot gold rose 0.6% to $1,797.96 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Jason Scott.
Most read from Bloomberg Businessweek
©2022 Bloomberg LP
