Goldman Sachs: New PM Unlikely To Change JGB Yield Trajectory

Goldman Sachs note that "on the fiscal front, what's most relevant for the rates market will be more clarity on Kishida's stimulus plan which calls for several tens of trillion of yen and will likely be financed via JGB issuance. In terms of monetary policy, the next PM will be tasked with choosing who will succeed Kuroda as Governor of the BoJ, though the incoming PM appears to support maintaining easing with the goal of escaping deflation."

• "Therefore, we see limited implications for interest rates from the recent political changes. As we've written recently, expectations of stimulus and headline numbers have tended to overstate actual additional new spending, and beyond the near-term headlines, we think the more dominant factor for the domestic bond market will be yield spillovers from outside of Japan. A further extension of the sell-off in either Europe or the U.S. could see yields move higher, especially as the domestic cyclical position improves, whereas excitement over stimulus prospects could fade over the next few months. On the whole, we remain of the view that JGBs are likely to see only a very gradual and modest climb higher."