The theory would say that an increase in the profitability of sovereign bonds normally anticipates a more restrictive monetary policy. But they are not being days normal. The announcement that Germany eliminates its brake on indebtedness to increase its defense expenditure fired the performance of all bonds. This tsunami He reached Japan, where ten -year titles exceed 1.5% return that involves reaching 2009. And, meanwhile, the market considers that the Bank of Japan will stop its types of types by 2025.
As happened with the German debt curve last Wednesday, all maturities of the Japanese debt recorded a rapid increase in profitability. While the ten -year bonus reaches 1.53% (The maximum of 2009 are at 1,545% and the following roof would be in summer 2008), the 40 -year titles are at historical maximums and never before 2007, the year in which titles began to be broadcast in Japan with this expiration.
“We are in the midst of a historical change. We cannot be optimistic about the bonds until we see a clearer direction of where this change goes,” said Fivestar portfolio manager Asset Management, Hideo Shimomura. The expert indicates, in turn, that the escalation of the indebtedness necessary for finance military spending plans will force the monetary policies of the central banks.
On the part of the Bank of Japan, the market maintains a rise in interest rates at the June meeting as projected last week, according to Bloomberg. However, the restrictive adjustment of the types that affect the price of Yen will be expanded over time, since this Monday there were 50 basic points of upstart for the whole of the year and this Thursday It would only be 30 basic points.
“1.5% of the performance of Japanese bonds to ten years is a psychological milestone, but it is not a barrier and can break depending on external factors“He anticipated the fixed -income strategist in Mitsubishi UFJ Morgan Stanley Securities, Keisuke Tsuruta. However, the Bank of Japan will continue to be conditioned by national economic trends and the evolution of the country’s prices to determine what time is adequate to harden its monetary policy, beyond global geopolitics.
The increase in debt profitability in the secondary market also alters the strategies of Carry Trade. Japanese investors, historically accustomed to buying foreign debt to avoid losing purchasing power, still do not find in the national debt a shelter against increased prices. As an example, Japanese bonds that offer greater profitability today are 40 -year titles over 2.8%. The general CPI in January stood at 4%.
But the increase in indebtedness in Germany that brings the increase in the return of government bonds also alters the exchange rates in the intersection of currencies between the euro, the dollar and the Japanese yen. Sales that carry the returns of Japanese government titles to maximum of more than a decade also allow German bonds to be cheaper for Japanese investors than American bonds with currency coverageaccording to Julius Baer.
The last time the market contemplated an abrupt change in the strategies of Carry Trade linked to Japanese assets was in August last year, when The Japanese market dragged the rest of the world in a collapse that took 12.4% of the Nikkei index. “The narrowing of the yield differential with the US due to the increase in the yields of the Japanese titles and any weakening of the dollar are risks that should not be underestimated. We will closely follow the signs of repatriation of the Japanese pension funds to their country of origin,” said Julius Baer’s expert in Asian fixed income, Magdalene Teo.
With the change in the profitability of the German and the Japanese bonds, the risk premium of these seconds are again at least of the year (under the 135 basic points). Meanwhile, the Yen Japan also cuts distances with the US dollar, when every dollar is changed to 148 yen. So far this year, the Green ticket Back almost 6% in front of the Japanese currency.
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