M&G’s Leaviss Buys Yen on Bet BOJ to Quit Curve Control Any Time
The Bank of Japan’s (BOJ) curve control policy is facing a challenge from M&G Investment Management’s Charles Leaviss. He is betting that the BOJ will soon abandon its policy of controlling the yield curve.
What is Curve Control?
Curve control is a policy used by central banks to influence the shape of the yield curve. It involves setting a target for the yield on a particular bond, and then buying or selling bonds to keep the yield at that target. The BOJ has been using this policy since 2016, when it introduced negative interest rates.
Leaviss’ Bet
Leaviss is betting that the BOJ will soon abandon its curve control policy. He believes that the BOJ will be forced to abandon the policy due to the increasing cost of maintaining it. He is also betting that the BOJ will be unable to keep up with the rising demand for Japanese government bonds (JGBs).
Rising Demand for JGBs
The demand for JGBs has been increasing in recent months, as investors seek safe havens in the face of global economic uncertainty. This has put pressure on the BOJ to buy more JGBs in order to keep the yield curve under control.
Cost of Curve Control
The cost of maintaining the curve control policy has been increasing as the BOJ has had to buy more JGBs in order to keep the yield curve under control. This has put pressure on the BOJ’s balance sheet, as it has had to increase its holdings of JGBs.
Leaviss’ Strategy
Leaviss is betting that the BOJ will soon abandon its curve control policy. He is buying the Japanese yen in anticipation of the BOJ’s move. He believes that the yen will appreciate if the BOJ abandons its policy, as investors will flock to the currency as a safe haven.
Risks of the Strategy
Leaviss’ strategy carries some risks. If the BOJ does not abandon its curve control policy, then the yen could depreciate. Additionally, if the global economy recovers, then investors may shift away from the yen and towards riskier assets.
Conclusion
M&G Investment Management’s Charles Leaviss is betting that the Bank of Japan will soon abandon its curve control policy. He is buying the Japanese yen in anticipation of the BOJ’s move. While the strategy carries some risks, Leaviss believes that the yen will appreciate if the BOJ abandons its policy.