Yield Curve Control

Yield curve control is a central bank policy of pinning a specific bond yield at a target by promising unlimited purchases, rather than only setting the overnight rate. The Bank of Japan ran it from September 2016, capping the 10-year government bond yield near 0 percent, before finally exiting in March 2024.

Why it matters

Yield curve control converts monetary policy from a quantity commitment into an open-ended price commitment: the central bank must buy whatever the market sells at the cap, however much that is. Defending its target through years of pressure left the Bank of Japan owning roughly half of the entire Japanese government bond market. Australia's central bank tried a shorter version and abandoned it under market attack in late 2021, at real cost to its credibility.

The policy sits at the border of monetary and fiscal territory, since capping government borrowing costs regardless of issuance is difficult to distinguish from financing the state.

In the gold vs bitcoin debate

Yield curve control is the clearest modern case of a central bank overriding the market's price for money, and it features heavily in the case for both gold and bitcoin, since defending a cap can require money creation without any stated limit. An asset whose supply answers to no such commitment, metal or protocol, is the hedge that argument recommends.