The “Nightmare Scenario” For The Bank Of Japan Is Starting To Come True…(Toast!!)

Monday, September 26, 2016
By Paul Martin

by Tyler Durden
Sep 26, 2016

On Friday, when we summarized why “It May Be Over For The BOJ” we presented a variety of sellside opinions, all of which were unanimously pessimistic on the BOJ’s latest policy, we observed that the weakest link for the BOJ’s latest incernation of QE, aka QQE with Yield Curve Control, or QQEWYCC (which even rhymes) would be if the 10Y JGB resumed its drift lower into negative territory, coupled with a return to curve flattening, two adverse side effects of its own prior policy which the BOJ is now explicitly trying to undo due to their adverse impact on the local banking and pension sectors.

However, as we noted overnight, in a very ominous development, or what already dubbed the BOJ’s “nightmare scenario” – for both the credibility of the BOJ and the return of VaR shocks first in Japan and soon elsewhere – the 10Y JGB did indeed resume sliding into deeper negative territory, away from Kuroda’s 0% price target, resulting immediately an a resumption in curve flattenting.

The Rest…HERE

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