How do you spell relief? BOJ-FED. That’s what the bond market is feeling after yesterday’s double central bank meetings.
The Bank of Japan’s decision to control the shape of the yield curve and to peg the level of the 10-year note at near 0% relieved traders who feared Japan would simply focus on the short end of the yield curve and let the long end find its own level. Bond traders love manipulation, as long as it keeps rates low, and the BOJ is taking it to unprecedented levels.
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The Fed did exactly as expected, which was nothing, and chair Janet Yellen’s press conference gave traders hopes the Fed will move even more slowly than expected.
The Fed is still likely to move in December, but there is room for doubt. I’ve often praised Yellen for her performance in these press conferences, but my praise this time is different. She did an artful job of not giving straight answers to any questions.
Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.