For Tanguy Le Saout, head of European fixed income at Pioneer Investments, while the BoJ has hinted at actions that might cause a steepening of the yield curve he is of the view that it will do very little. A lack of movement that will ultimately disappoint markets, which will in turn put upward pressure on JGB yields.
Such a disappointment would be indicative of the mood that is permeating markets more broadly and one that is behind the drive up in global bond yields and credit spreads – the idea that central banks are cooling on the idea of adding further monetary stimulus.
This is worrying because, as Claudio Borio, head of the Bank of International Settlements’ monetary and economic department pointed out last Friday in remarks ahead of the release of its latest quarterly review, “Developments in the period under review have highlighted once more just how dependent on central banks markets have become.”
“It is becoming increasingly evident that central banks have been overburdened for far too long,” he added.
It is impossible to predict what exactly will happen on Friday, but increasingly markets are behaving like a toddler on a sugar high – unpredictable, impossible to please and prone to tantrums. In such an environment it is unsurprising that many commentators are recommending taking risk off the table.
