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14 May 2013
Forex Flash: Yields signaling end of bull market in Japan? – Deutsche Bank
FXstreet.com (Barcelona) - The recent price action in JGBs is probably worth tracking given the recent extreme policy changes there. The 10-year yield started the year at 0.79%, fell to a low 0.44% soon after the BoJ announcement and is now back up at 0.79%.
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Every time yields sell-off fairly sharply there are the clarion calls suggesting that this is marking the end of the very long bull market. On all occasions so far they've been premature with most core markets at or very close to their all-time yield lows only a couple of weeks back.”
The dilemma we have is that we know that one of these sell-off are likely to be the real thing and the start of a march higher in yields. Such a scenario is inevitable from these levels and with all this global money printing. However, “we're not convinced that this is the start. There seems to be too much money sloshing around the system at the moment for this to be a sustained bear market. For now we think that yields will generally find a ceiling not too far above these levels and then range trade for the foreseeable future.”
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Every time yields sell-off fairly sharply there are the clarion calls suggesting that this is marking the end of the very long bull market. On all occasions so far they've been premature with most core markets at or very close to their all-time yield lows only a couple of weeks back.”
The dilemma we have is that we know that one of these sell-off are likely to be the real thing and the start of a march higher in yields. Such a scenario is inevitable from these levels and with all this global money printing. However, “we're not convinced that this is the start. There seems to be too much money sloshing around the system at the moment for this to be a sustained bear market. For now we think that yields will generally find a ceiling not too far above these levels and then range trade for the foreseeable future.”