USD/JPY and Steepening bond yield curve

Bank of Japan (BOJ) is likely to overshadow next week’s FOMC rate decision, said Marc Ostwald, Strategist at AMD             Investor Services International on today’s finance show. Ostwald focused more on BOJ and explained the reasons for the recent steepening of the bond yield curve and its impact on the financial markets.

Watch the segment with Marc Ostwald here – https://www.youtube.com/watch?v=JAkb7an22Is

Blame the BOJ

The key message that comes through is that the Bank of Japan (BOJ) is responsible for the recent steepening of the bond yield curve across the advanced world. There is speculation that BOJ would trim long duration bond purchases and increase short duration bond purchases in order to compensate banks and pension funds for the loss due to negative rates.

Furthermore, the BOJ stands divided in three groups with regards to future course of action – one group supports QQE, another one negative rates and the last one has lost confidence.

The whole thing clearly represents central bank exhaustion and looks like yield curve steepening would continue in the future. That also means the Yen may have topped out ( USD/JPY             could have bottomed out).

James Helliwell, Head of Research at Lex Van Dam Trading Academy explained the trade of the day – Long USD/JPY             . Watch the show here - https://www.youtube.com/watch?v=HBhISEGuupA

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