Bitcoin Holds Firm Above $29K Amid BOJ’s Flexible Yield Curve Control

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Bitcoin (BTC) held steady above the $29,000 mark on Friday as investors kept a close eye on the latest developments from the Bank of Japan (BOJ). Japanese and U.S. government bond yields experienced a rise following the BOJ’s decision to maintain low-interest rates while making a slight tweak to its liquidity-boosting bond-buying program known as yield curve control (YCC).

The BOJ decided to retain the short-term interest rate target at 0.1% and keep the YCC’s 10-year government bond yield target around 0%. It also stuck with its previous decision from December 2022, allowing the 10-year yield to fluctuate by 0.5% above and below the 0% target. However, in a significant change, the central bank clarified that the 0.5% band would serve as a reference and not a strict cap, signaling more flexibility in its yield curve control approach.

While the announcement appeared to be aimed at downplaying any hawkish implications, market experts interpreted the move differently. Rates strategist Rishi Mishra pointed out on Twitter that the adjustments were essentially a proper YCC tweak, cleverly presented with semantics to soften their impact.

Chris Weston, head of research at foreign-exchange brokerage Pepperstone, noted that the new hard cap is now set at 1%, signaling a more liberal stance on controlling yields.

BOJ faces IMF pressure over yield curve control

The BOJ’s decision comes shortly after the International Monetary Fund (IMF) urged the central bank to move away from yield curve control to prepare for future interest rate hikes. Expectations for a widening of the band had been anticipated by several investment banks, with Goldman Sachs warning that a 100 basis-point band might send misleading signals to the market.

In response to the BOJ’s announcement, Bitcoin’s price remained relatively stable, hovering around $29,250, without significant fluctuations. However, bond yields saw an increase, presenting negative cues for risk assets, including Bitcoin. The 10-year Japanese government bond yield rose by six basis points, reaching its highest level since January, while its U.S. counterpart rose by three basis points to 4.03%, following an overnight 13 bps gain.

The BOJ’s move to relax its grip on the bond market during a time when other major central banks, including the Federal Reserve, are signaling a possibility of higher interest rates for an extended period, could pose challenges for risk assets.