Today’s News

The Japanese yen lunges forward against all of its major peers after a report that the Bank of Japan (BOJ) plans to discuss tweaking its yield curve control policy later in the day.

The Japanese currency rallied as much as 2% against the euro, the highest since March, while rising by 1% against the dollar. The BOJ will consider letting long-term interest rates rise above its 0.5% cap by “a certain degree,” Nikkei reported, without attribution.

Markets have been running amuck with speculations in recent weeks that the BOJ will finally move to stop capping yields on government bonds after modifying its approach late last year. Traders have ramped up protection against a surge in yen, which would likely strengthen if the ceiling was forgoed.

Japanese bond futures slumped on the report, falling approximately 87 ticks, the most since March on a closing basis.

Other reports include:

Hawkish Hint Sends U.S. Markets Spinning

It didn’t take much to scare jittery American investors who have been pushing risk assets higher for the better part of the year. News that Japanese policy makers are weighing a hawkish tweak to years of bond yield repression ignited a small-scale tempest across the U.S. markets yesterday.

Treasury yields spiked, the yen jumped, and what had been another rousing rally in the S&P 500 quickly reversed. Pain spread rapidly across asset classes as traders came to grips with prospects that the last major central bank to resist restrictive policy might cave.

Japan Yield Breaks BOJ Ceiling

Japan’s benchmark government bond yield pierced the central bank’s ceiling amid speculation that policymakers are discussing loosening their tight grip on interest rates.

The 10-year yield climbed to 0.505% today, beyond the BOJ’s cap of 0.5%, as pressure builds on the BOJ to adjust its policy. While a majority of economists had projected the BOJ would stand pat this week, the Nikkei reported that officials would discuss on letting yields rise above its current limit by a “certain degree.”

Asia Stocks To Dip

The yen rallied and Asian equities were set to open lower as a report that the BOJ would discuss tweaking its policy today rumbled through markets from rates to stocks.

The Nikkei report that the BOJ would consider letting 10-year yields rise to some degree beyond its 0.5% cap pushed Treasury yields up as well as the Japanese currency. That impact in rates, which were already rising on U.S. economic data, flowed into stocks on Wall Street, which erased gains. Futures for equity benchmarks in Japan, Hong Kong and Australia all are pointing to declines.