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100 sats \ 0 replies \ @0260378aef 17 Jun 2022 \ parent \ on: 10Y bond yields up 80% in Japan today. I guess the freefall started today. bitcoin
Japan's central bank keeps its government bond (JGB) yields below a ceiling of (I think) 0.25%. It does this buy simply buying up the bonds (using printed yen, basically) when they go too high [*]. That last sentence was a big oversimplification of the CB's behaviour and may be subtly or grossly wrong, I apologise.
And that it is an oversimplification, is seen from this headline: there is still some kind of "free" market for JGBs, and they are showing a big spike in the JGB 10 year yield, well above the 0.25% "ceiling". Whether the CB wakes up tomorrow and says "lol no" and pushes the yield back below the ceiling, I have no idea. But it's always interesting seeing a peg break.
[*] - the basic dynamic of bonds. As their price falls, the effective yield (interest rate) rises, e.g. if the interest rate is 10% at a price of 100, then if the price falls to 99, the interest rate has become ~ 11%.