Yield curve control (YCC) is an unconventional monetary policy tool where the central bank commits to keeping the interest rate on government bonds of a specific maturity (like 10-year bonds) at a set level.
While central banks typically control short-term rates, YCC extends control to long-term rates. If rates rise above the target, the central bank buys bonds; if they fall below, it sells.
The goal is to keep long-term interest rates stable and low, making borrowing cheaper for businesses and individuals.
The Bank of Japan has been implementing YCC since 2016, targeting near-zero yields on 10-year government bonds.
Risks include distorting natural market processes, ballooning the central bank's balance sheet, and difficulty controlling inflation.
Bangladesh Bank manages treasury bill and bond auctions but has not formally implemented YCC.