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The BOJ bought a record $81 billion in Japanese bonds to defend the yield cap

What's new?

Tokyo's bond market started the week on a less volatile market as traders assessed unprecedented intervention by the Bank of Japan, which dragged benchmark yields back below 0.25%, the yield cap imposed by the Bank of Japan.
Ten-year yields drop below 0.25% on Monday after surging to 0.31% on Friday. The BOJ’s 10.9 trillion yen ($80.8 billion) of government bond purchases last week, the most on record, helped to ease the market. The central bank ramped up bond-buying as benchmark yields breached it's 0.25% tolerated limit amid a global debt selloff.

The long dollar trade is still on

The long dollar is still the fashion trade as the FED is still focused on controlling inflation by hiking more in the coming month, so the momentum on the dollar is still there until the inflation returns to a more normal level. The market will also increasingly focus on the next 75 bps at the July FOMC meeting. The following inflation figures will give a hint of the dollar direction.

What’s in the pipe?

  • RBA minutes, Governor Philip Lowe due to speak, Tuesday
  • Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
  • Bank of Japan April minutes, Wednesday
  • Powell US House testimony, Thursday
  • US initial jobless claims, Thursday
  • PMIs for Eurozone, France, Germany, UK, Australia, Thursday
  • ECB economic bulletin, Thursday
  • US University of Michigan consumer sentiment, Friday
  • RBA’s Lowe speaks on panel, Friday

FX rates

USD/JPY @ 134.58 - Bullish trend

EUR/USD @ 1.0518 - Bearish trend

GBP/USD @ 1.2227 - Bearish trend

AUD/USD @ 0.6972 - Bearish trend

USD/CNH @ 6.6839 - Bullish trend

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