Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
The surprise BoJ YCC band tweak that was delivered a few hours ago loosens the grip of what is perhaps the final major anchor point for global duration. The chart below compares the major long end JGB benchmark yields to FX-hedged yields across some of the major global core FI markets (based on the rolling 3-month FX-hedging costs from the perspective of a Japanese investor). As we have noted previously, domestic yield advantages when accounting for the well-documented elevated FX-hedging costs (along with a steep JGB curve and ongoing market vol.) have generated a home bias for Japanese investors in recent months. This should persist, with the BoJ tweak set to do little to meaningfully reverse the trend in the immediate term.
Fig. 1: 10- To 40-Year JGB Yields Vs. The Major 10-Year Core Global FI Alternatives, FX-Hedged From The Perspective Of A Japanese Investor
Source: MNI - MArket News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.