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TD Securities: ACGBs Vulnerable To A Hawkish BoJ Shift

AUSSIE BONDS

TD Securities expects “the BoJ to tighten monetary policy settings further. We expect an additional 25bps widening in the 10-Year JGB trading band this week with potentially more policy tightening in store by April.”

  • “The pace/size of potential BoJ tightening TD anticipates represents a significant shift in policy. Easy BoJ policy forced Japanese investors to increase offshore investments so BoJ tightening should drive at least some reversal of these flows.”
  • “We look at the absolute and relative shifts in Japan's foreign fixed income investments since 2006. The markets most exposed to Japan selling are likely to be USTs, Bunds/OATs and ACGBs, with ACGBs the most vulnerable in our view.”
  • “Given our view that ACGB yield highs have probably already been hit and we are skewed as better buyers on yield back-ups, we are reluctant to short ACGBs outright. The risk-reward favours positioning into short ACGBs x-mkt or ACGBs steepeners.”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
HomepageBond Market NewsBulletMarketsFixed Income Bullets
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
HomepageBond Market NewsBulletMarketsFixed Income Bullets

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