Global markets experienced a dramatic increase in volatility in the last hours of trading in New York on Thursday followed by a gradual reversal, resulting in a fresh bullish session for both equities and bonds on Friday. But what does the Bank of Japan have to do with all of this?
The wild market fluctuations started around 1 p.m. ET on Thursday, when Nikkei Asia reported the Bank of Japan was ready to tweak its yield curve control (YCC) policy. The yield on the Japanese 10-year bond is set at zero under this policy, with variations allowed within 0.5%. A change in policy from the Bank of Japan, one of the few remaining major central banks with negative interest rates, could have a significant impact on markets.
