Kuroda Relieves Global Markets
Powell’s stressed global markets were relieved by Bank of Japan Governor Haruhiko Kuroda.
Kuroda relieves the global markets. While hard sales occurred in the markets that did not get the expected messages from Fed Chairman Jerome Powell, the statements of Bank of Japan Governor Haruhiko Kuroda on the yield curve positively affected the risk perception.
Global markets fluctuated with the statements of the two major central bank governors.
Sales gained momentum when Fed Chairman Jerome Powell’s statements on the recent developments in bond yields did not satisfy the markets. On the other hand, the messages given by the Governor of the Bank of Japan Haruhiko Kuroda made the markets breathe.
Unlike the central banks of other developed countries, the Bank of Japan, which officially implements the yield curve target regime, will not make a move to steer the curve. Kuroda, on the speculation that the movement band of the 10-year return target will be expanded, said, “It is neither appropriate nor necessary to do this”.
Making a statement in the Japanese parliament, Kuroda stated that they are not in the 0.3 point expansion stage to both sides of the 0 percent yield curve target and said, “More discussion is needed for this step at this stage.”
In an environment where bond yields increased, the Bank of Japan’s avoidance of steeping the yield curve also helped to recover some of the losses of risky assets that depreciated along with Fed Chairman Jerome Powell’s messages.
In the S&P 500, which completed Thursday with a loss of 1.3 percent, the futures remained flat after the move, even though they lost 0.7 percent on the new trading day. The Japanese Topix index also limited its losses after falling to over 1 percent in a mid-session. Similarly, South Korean Kospi and Hong Kong Hang Seng limited their losses.
Bloomberg Dollar Index, which started the last trading day of the week with a gain of up to 0.2 percent, turned to a horizontal course.
Powell’s Statements Did Not Satisfy Markets
Yesterday, Fed Chairman Jerome Powell said that he was following the jump in yields in the bond market and did not give a message to intervene in this market. Commenting on the Wall Street Journal webinar, Powell commented on the recent rise in bond yields, said, “It’s a move worth noting that caught my attention. I worry about market movements that could lead to constant tightening in financial conditions that threaten our achievement.” Powell has repeatedly tried to relieve fragile markets, saying they were too far away from their goals to pull the Fed’s support. Stating that they will be patient, Powell said, “We are far from our goals.”
Losses in US 10-year bonds increased after Powell’s statements, and inflation expectations reached session highs. Investors in the bond markets were expecting Powell to stabilize the markets by delivering an intervention message, especially for long-term bonds.
Evercore ISI Vice President Krishna Guha said, “Powell remains dove. However, it is not enough to avoid a further increase in bond yields.”