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1 May 2013
Forex Flash: JGBs high since before BoJ, but... - Nomura
FXstreet.com (Barcelona) - Nomura economist Yujiro Goto notes that even though JGB yields are higher than before the BOJ easing on April 4, real yields after considering higher inflation expectations are much lower than six months ago.
He adds that the BOJ's rinban operation yesterday could not lower JGB yields from 3yr to 20yr. The 10yr auction today went well, sending JGB yields broadly lower, but yields are still broadly higher than before the BOJ announcement on April 4. Nonetheless, he writes, “10yr real yields are still at around the lowest level since 2005 and we expect them to stay low, gradually encouraging Japanese investors to shift their money from risk-free assets into risky assets including foreign assets. We see the JGB market as the key factor to determine the aggressiveness of Japanese investment in foreign assets in the near future, but the gradual rise in inflation expectations should be also carefully monitored.”
He adds that the BOJ's rinban operation yesterday could not lower JGB yields from 3yr to 20yr. The 10yr auction today went well, sending JGB yields broadly lower, but yields are still broadly higher than before the BOJ announcement on April 4. Nonetheless, he writes, “10yr real yields are still at around the lowest level since 2005 and we expect them to stay low, gradually encouraging Japanese investors to shift their money from risk-free assets into risky assets including foreign assets. We see the JGB market as the key factor to determine the aggressiveness of Japanese investment in foreign assets in the near future, but the gradual rise in inflation expectations should be also carefully monitored.”