The Yield Curve Control (YCC) strategy is the only real remaining arrow in the BoJ’s quiver. Via YCC, the BoJ targets a 10-year JGB yield close to 0% and manages purchases to sustain the yield target. In our view, any…
JGBs outperform their developed market peers when global yields rise, and underperform when global yields fall. In other words, JGBs are a low-beta sovereign bond market, making them a useful way to manage duration risk in a…
Highlights The unifying chorus among global central banks is currently for more monetary stimulus. In the race towards lower interest rates, the ultimate winners will be pro-cyclical currencies. Italian 10-year real government bond…
The Bank of Japan did little to feed expectations of a monetary policy easing. Governor Kuroda acknowledged that risks surrounding global trade are elevated, but nonetheless also mentioned that he expects Chinese growth to…
Highlights Fed: Depressed U.S. Treasury yields now discount more rate cuts than the FOMC is likely to deliver, even for “insurance” purposes to offset the negative growth impacts from trade policy uncertainty. Maintain a…
Inflows into Japan could accelerate, given cheap equity valuations and improved corporate governance that has been raising the relative return on capital. The propensity of investors to hedge these purchases will dictate the yen…
With a net international investment position of almost 60% of GDP and net income receipts of almost 4% of GDP, volatility in markets tend to lead to powerful repatriation flows back to Japan. Real interest rates also tend to be…
Highlights Monetary policy remains accommodative in Japan, but will tighten on a relative basis if the Bank Of Japan (BoJ) stands pat. The BoJ’s margin of error is non-trivial, since a small external shock could well tip the…
There is, however, at least one key macro difference between the two regions: While long-term inflation expectations in the euro area have declined, they are still well above Japanese levels. As a result, real yields are quite a…
Highlights The view that the world will sink into a deflationary “ice age” hinges on the assumption that policymakers will make a colossal mistake by failing to do what is in their own best interest. Contrary to popular…