Over the past few months, global yields returned to pre-pandemic ranges. Global central banks’ reactions varied. At one end of the spectrum, the Fed, BoE, BoC and RBA have taken a benign neglect attitude, arguing that the ramp up in yields reflects improved economic prospects. Fed Chair Jerome Powell likely speaks for the group when saying that higher yields are no issue provided market conditions remain orderly and recovery prospects are unimpacted.
At the other end of the spectrum, the BoJ’s operational target is the 10-year yield. At its 19 March policy meeting, it maintained the 0% target for the 10-year yield and widened the target band to +/-25bp from previously +/-20bp. Simultaneously, it specified it would introduce ‘fixed-rate purchase operations for consecutive days as a powerful tool to set an upper limit on interest rates when necessary’.
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