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15 Apr 2013
Forex Flash: JGB´s are still volatile - Nomura
FXstreet.com (Barcelona) - Nomura strategist Yujiro Goto notes that JGB´s are still volatile and may be playing a role in the recent halt of USD/JPY´s surge higher.
He notes that JGB yields declined significantly immediately after the recent landmark BoJ decision, but they are now trading broadly higher than the level before the BOJ's historic announcement. He suspects that expectations of a reflationary impact from the decision may lead to a steepening of the curve, but the short-end of curve has also been also rising. He adds that as Governor Kuroda stated that the Bank would not consider an IOER cut anytime soon and thus, rises of short-end of JGB yields to 10bp are reasonable, but the latest rises of 2-3yr yields look overdone under the BOJ's stronger commitment to keep interest rates at low levels. He finishes by adding that as two JGB auctions are scheduled this week, high volatility in the JGB market may continue in the near future, but we expect the market to stabilize gradually and yields to remain at low levels. The meeting between the BOJ and investors on April 17 is worth monitoring.”
He notes that JGB yields declined significantly immediately after the recent landmark BoJ decision, but they are now trading broadly higher than the level before the BOJ's historic announcement. He suspects that expectations of a reflationary impact from the decision may lead to a steepening of the curve, but the short-end of curve has also been also rising. He adds that as Governor Kuroda stated that the Bank would not consider an IOER cut anytime soon and thus, rises of short-end of JGB yields to 10bp are reasonable, but the latest rises of 2-3yr yields look overdone under the BOJ's stronger commitment to keep interest rates at low levels. He finishes by adding that as two JGB auctions are scheduled this week, high volatility in the JGB market may continue in the near future, but we expect the market to stabilize gradually and yields to remain at low levels. The meeting between the BOJ and investors on April 17 is worth monitoring.”