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Goldman Sachs Maintain Previous Preferences Post-BoJ

JGBS

Goldman Sachs note that their “economists continue to see a high bar for the BoJ making adjustments to its YCC framework during the remainder of Governor Kuroda’s term, as the bank believes that the main drivers of higher inflation are cost-push factors, and therefore unsustainable absent robust wage growth. The rapid weakening of the yen has been a big factor in raising import prices, and in our view, the BoJ maintaining its current policy could exacerbate this dynamic. However, rising recession concerns in Europe and the U.S. should provide some relief in the near term; with global yields lower, 10-Year JGB yields have edged away from the upper band, and the yen has seen some respite. Such relief could be short-lived; as we’ve noted previously, sticky and broad-based inflation will likely put a floor under global interest rates, and risks of renewed upward pressure on yields remain. As a result, maintain our long end yield curve steepening view and our short duration bias for longer maturity JGBs.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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