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BOJ Flags Smallest Long Bond Buys Since ’14 to Control Curve

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Investors hoping the Bank of Japan would provide clues on how it plans to control yields in a monthly statement Friday were not disappointed.

The central bank reduced its target for purchases of debt maturing in more than 10 years to a range of about 200 billion to 400 billion yen ($2 billion to $4 billion) per auction in October from about 300 billion to 400 billion yen for the previous month. Based on its plan to buy 410 billion yen at the first auction next month, that would be the least since expanding asset purchases two years ago, based on calculations that assume the same purchase amount at each operation.

“The announcement shows the BOJ’s intention to steepen the yield curve,” said Kazuhiko Ogata, chief Japan economist at Credit Agricole SA in Tokyo. “The long end of the curve may see some selling pressure, but the impact on JGBs and the yen will probably be limited because the numbers came in within the expected range.”

The BOJ said in its Sept. 21 policy statement it is now targeting the yield curve, but only specified two points: the deposit rate at minus 0.1 percent and the 10-year yield “around zero percent.” That shone a spotlight on Friday evening’s statement in the hope that more on the desired curve shape could be gleaned from the central bank’s actual purchases.

The bank also lowered the target for five- to 10-year securities to 290 billion to 530 billion yen, from 300 billion to 600 billion previously. It left the frequency of its operations at 8 to 10 times per month, with an overall target to buy 8 trillion to 12 trillion yen.

Too Low?

The BOJ gave a clue to its intentions earlier Friday, when it bought 410 billion yen of five- to 10-year securities, instead of the 430 billion yen indicated in its statement for September. It was the first time in six months the central bank had reduced buying before releasing its monthly plan, and spurred speculation the benchmark yield might be getting too low for Governor Haruhiko Kuroda’s comfort.

“The BOJ may have reduced purchases in order to stem the decline in 10-year yields, which were approaching minus 0.1 percent,” Hiroki Tsuji, a Tokyo-based market analyst at Mizuho Securities Co. said before the announcement. “It’s likely to strengthen the market’s perception that minus 0.1 percent is the lower bound of what the BOJ will tolerate.”

The benchmark 10-year yield fell as low as minus 0.09 percent this week for the first time in a month. It was at minus 0.085 percent when markets closed on Friday in Tokyo, unchanged since the release of the statement. The yield rose above zero for the first time since March on Sept. 21.

The gap between yields on two- and 30-year debt — a measure of the steepness of the curve — is near the same level as it was at the time of the policy meeting at around 72 1/2 basis points, after compressing to as little as 66 basis points in the interim.

Uncharted Territory

Kuroda’s targets for the yield curve take Japan’s monetary policy further into uncharted territory as he struggles to stoke inflation. It also spurred calls for clarity on how he plans to implement the changes, as well as prompting speculation the BOJ may be laying the groundwork for a reduction in its 80 trillion yen a year in bond purchases.

The bank said last week it would adjust the volume of its asset buying as necessary in the short term to control bond yields, while keeping them at about 80 trillion yen annually over the long term. The central bank has had a target to buy 8 trillion yen to 12 trillion yen in government bonds from the market each month. The BOJ owned 36 percent of outstanding JGBs at the end of June.

A summary of opinions from the central bank’s meeting released Friday morning in Tokyo showed policy makers don’t intend to peg 10-year yields at zero for long in the future, and they will examine an appropriate shape for the yield curve at each gathering.

“Nobody knows what the ideal shape for the yield curve is,” said Makoto Suzuki, senior bond strategist at Okasan Securities Group Inc. in Tokyo.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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