The Bank of Japan just went on another bond buying spree and now the yen is getting smashed

Hit ’em while they’re down. Picture: Getty Images

Sovereign bond markets around the world are under pressure with yields continue to push higher on the back of hawkish central bank talk.

And that includes Japanese Government Bonds, or JGBs.

In order to prevent a rise in yields of a magnitude seen in other markets, the Bank of Japan (BoJ) went all-in earlier today, pledging to buy an unlimited amount of 10-year bonds at a yield of 0.11%.

It also upped its buying of JGBs maturing within 5 to 10-years, increasing its allocation from 450 billion to 500 billion yen.

The BOJ, as part of its quantitative and qualitative monetary easing (QQE) with yield curve control program, currently buys JGBs in order to anchor 10-year yields at around 0%.

After trading higher earlier in the session, 10-year JGB yields have fallen in recent trade, currently sitting at 0.081%, according to data from Thomson Reuters.

While the pledge to buy unlimited amounts of government debt with a 10-year maturity has prevented a more pronounced selloff in that part of the curve today, it hasn’t stopped 30 and 40-year JGB yields from hitting the highest level since February 2016 during the session.

The Japanese yen has also reacted to the BoJ move, selling off aggressively against all other major G10 currencies.

“In a world where FX flows are driven by ‘real’ bond differentials, the BOJ is anchoring their benchmark 10-year JGB yield, allowing other bond yields to move higher relative to theirs,” said Chris Weston, chief market strategist at IG Markets.

“In turn, this allows capital to move out of JPY.”

And traders are moving out of the yen.

The USD/JPY currently sits at 113.82, up 0.55% for the session.

USD/JPY 5-Minute Chart