JP10Y JAPANESE GOVERMENT 10 YEAR BOND YIELDJP10Y PLAYS A KEY ROLE IN YEN TRADING ACROSS ALL PAIRS
Interest Rate Differential: When JGB yields rise, it increases the interest rate differential between Japan and other countries. This makes JPY more attractive to investors, causing the currency to strengthen.
2. Capital Inflows: Higher JGB yields attract foreign investors seeking higher returns, leading to capital inflows into Japan. This increased demand for JPY causes the currency to appreciate.
3. Reduced Carry Trade: A higher JGB yield reduces the attractiveness of the carry trade, where investors borrow JPY at low interest rates to invest in higher-yielding assets. Reduced carry trade activity leads to a stronger JPY.
4. Increased Hawkishness: Rising JGB yields may signal a more hawkish stance from the Bank of Japan (BOJ), which can lead to a stronger JPY.
JP10Y trade ideas
Long live "The Widowmaker" trade in JGB'sHistorically, shorting the 10 year JGB was called the widowmaker trade. Yields have trended down for decades in Japan and many a brave soul has tried to call the bottom in yields. Surely the recent move from 1.10% to .72% added a few more souls to the list. RIP
Bank of Japan Yield Curve Control---
The carry trade - an investment strategy that takes advantage of differences in borrowing costs between countries - has provided bumper returns this year as most central banks have hiked rates, causing yields to rise, but at different paces.
"The world's favourite carry trade," according to Bank of America, involves investors borrowing Japanese yen where the central bank has pinned rates low, and converting them to Mexican peso to buy much higher-yielding bonds.
One-year bond yields are about 0.1% in negative territory in Japan , but their Mexican counterparts yield around 11%.
A hypothetical $50,000 invested in a short yen, long peso carry trade for the first six months of the year would have yielded a profit of $15,100, according to Refinitiv Eikon.
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As the Japanese Bonds start to escape BoJ's Yield Curve Control - this extremely leveraged carry trade is going to explode in everyone's face.
Bank of Japan may further adjust its YCC policyGovernment bond yields are about to reach the 1% upper limit, and the Bank of Japan may further adjust its YCC policy.
Market attention is focused on the actions the Bank of Japan will take regarding the 1% yield cap.
On Tuesday of this week, the Asian economic calendar was filled with various important data releases, with the policy meeting of the Bank of Japan being the focus of traders. On the last trading day of the month, the Bank of Japan is expected to make a minor adjustment to its "Yield Curve Control" policy to effectively tighten monetary policy, which is significant for global markets and policies. This is followed by announcements from the Federal Reserve on Wednesday and the Bank of England on Thursday.
Japanese bond and currency markets:
The BOJ may further adjust its YCC policy to allow the yield on 10-year Japanese government bonds to rise above 1%, and the Japanese yen has been strengthening for the second consecutive trading day, with the 10-year bond yield reaching its highest level in a decade, approaching 0.89%.
Market reactions:
However, based on calculations of the real effective exchange rate (taking into account the impact of negative interest rates and other policies), the yen is the weakest it has been in over 50 years, attracting foreign buyers to purchase assets at relatively cheap prices. The Nikkei 225 stock index fell by 1%. These reactions reflect the market's uncertainty and tension regarding potential changes in the Bank of Japan's monetary policy.
Japanese stock market:
Initially, it saw a significant rise at the beginning of the year, driven by expectations of an improved economic outlook for Japan after years of stagnation. However, concerns about the Bank of Japan tightening monetary policy in the second half of the year have weighed on the market, leading to a decline in the Nikkei index.
As the possibility of the BOJ abandoning its ultra-loose monetary policy has grown, the Nikkei 225 has fallen by 3.6% this month. However, due to many investors betting on the resurgence of the Japanese economy after decades of stagnation, the Nikkei 225 saw an astonishing 27% increase from January to June, reaching a high of nearly 34,000 points.
Market reactions:
This attractiveness of the Japanese stock market to investors is due to factors such as negative interest rates, the large-scale holdings of Japanese government bonds by the Bank of Japan, and the depreciation of the yen.
Japanese inflation:
Inflation in Japan has begun to rise and has exceeded 2%, which is a significant development considering Japan's long-standing struggle with deflation."
Inflation Wears Out Its Welcome in JapanHas anybody ever told you to be careful what you wish for because you might get it? Well, the Bank of Japan appears to be in one of those situations today.
Japan spent three decades oscillating into and out of deflation. As such, when inflation started to rise in 2022, the BOJ was initially thrilled. Finally deflation was coming to an end, and inflation was heading up to a target of 2.5%. The problem is that inflation didn’t stop heading higher at 2.5%. It’s now up to 4.2% excluding fresh food and energy. In a nation with a large elderly population where many people are on fixed incomes, having inflation too high is just as bad has having it too low.
But why should the rest of the world care what happens to Japan’s inflation rate? For starters, Japan has the world’s fourth largest economy, and what happens to the yen and to Japanese bond yields is of worldwide consequence.
Beginning in 2012, the BoJ launched a mega quantitative easing program – four times bigger than what the Federal Reserve did relative to the respective size of their economy. This QE program sent the yen plunging as the BoJ also capped 10-year Japanese government bond yields. But recently, they have softened the cap, sending not only Japanese bond yields higher but raising the cost of long-term borrowings all around the world, including in the United States and Europe.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
WILD VOLATILITY IN JAPAN - YIELDS FALLJGB's have collapsed from the highs. Falling over 22% tonight. If this weakness in the Japan yield market continues we should see the DXY eat that up.
this is a weekly chart of the JP10Y. It demonstrates a multi year trendline of resistance for Japanese debt. This chart data only goes back to 2006 however we still have to respect a major trend until proven otherwise.
Perhaps if this reversal completes on the weekly & monthly timeframe, Japan economy could be signaling some risk if a deflationary event were to happen rapidly.
Since BOJ owns most of the Japanese debt (bonds) analyzing this market can be tricky since its theoretically rigged since the buyer is the seller & the seller is the buyer.
JPY10HELLO GUYS THIS MY IDEA 💡ABOUT JP10Y is nice to see strong volume area....
Where is lot of contract accumulated..
I thing that the buyers from this area will be defend this LONG position..
and when the price come back to this area, strong buyers will be push up the market again..
UP TREND + Resistance from the past + Strong volume area is my mainly reason for this long trade..
IF you like my work please like share and follow thanks
TURTLE TRADER 🐢
Japan is having a bad dayThe interest rate flew up today. They will have to buy it back down. How long can they keep this up?
By the end of the year, maybe we'll see either a sovereign default or higher inflation in Japan.
Japan is the largest foreign holder of US debt. This likely will raise US rates.
When this trendline breaks, Japan may hyperinflateJapan's central bank is buying unlimited amounts of Japanese debt in order to maintain yields around 0.25%. This ratio shows yields over the central bank's balance sheet. When this trendline breaks to the upside, it essentially means that Japanese debt is being sold faster than the central bank can buy. Japan may be going through some serious financial events very soon.
www.cnbc.com
The bank of Japan is selling US treasuries in order to buy more Japanese treasuries. This may cascade into US problem of rising interest rates and unsustainable debt levels being that Japan is the largest foreign holder.
www.bloomberg.com
There goes the YenNot gamma, but maybe one of the most relevant recent developments: The crash of the japanese Yen.
The BoJ is pumping money into the system to prevent a collapse in the bond market and defend the 0.25 percent ceiling of 10Y JGBs. As a result the Yen is crashing, which is again one of the drivers of the massive dollar rally.
If Japan breaks, many more things will start to break - and possibly very fast with enormous consequences not only for the financial system.
110% Gain!Hi all, I was looking at global interest rates, when I came across this idea. This is the Japanese 10 year interest rates. Historically, Japanese rates are super volatile, while US rates are very calm and move slowly. Anyway, my Technical and Fundamental Analysis is below:
Technical Analysis: According to this charts technicals, it has a flag pattern. In case you are unfamiliar with this pattern, it is a very bullish one. It is at support level of the flag pattern, so it should rise back to resistance, and hopefully breakout this week. To measure a flag pattern, you measure the gain of the previous breakout. In this case, I measured the previous breakout of around 110%. So, this would be a fair gain.
Fundamental Analysis: I had dug up some information on Japans inflation rate, and just so you know, the interest rates of a country usually move the same as inflation. Anyway, for the last few months, Japans inflation rate has been falling. This is why the interest rates took a sharp decline. However, this last month, inflation took a jump again. I think that is will cause the Japans interest rates to breakout and continue to rise.
Thanks guys, please like and follow!
None of the information above is investment advise
5 things you need to know about BOJ's Monetary Policy Meeting1. Yields: Continued to peg 10-year JGB yield at "around zero", but widened the trading bond of 10-year JGB to plus minus 0.25%
2. Purchase of ETF: Ditched its 6 trillion yen guide for annual purchases of ETF , however, it will continue to buy equities as necessary with upper limits of about 12 trillion yen.
3. Interest Scheme to Promote Lending: Established the scheme as an incentive to financial institutions' currenc account balances. The applied interest rates will be linked to the short-term policy interest rate.
4. Short-term policy interest rate: Applied a negative interest rate of minus 0.1 percent to the Policy-Rate Balances
5. Inflation-overshooting commitment: The Bank commited to cotinuing to expand the monetary base until the YOY increase of CPI exceeds the price stability target of 2 percent.
MM Analysis
The NI225 dropped by almost 1.5% followed by the BOJ's announcement of scraping the ¥6tn guideline and widending the trading bond of 10-year JGB. While we believe, the BOJ's recents move attempted to conduct the Yield Curve Control (YCC) policy more flexibily, keep an eye on the inflation!
JAPAN 10-Year Bond Yield - path to lower levels aheadJapan 10-year interest rates seems to be tracing intermediate wave 3 of primary wave 5 down. A critical level is at -0.19, the low of minor wave B. If yields crosses this level the odds get stronger for this scenario and yields could go below -0.29. FOLLOW SKYLINEPRO TO GET UPDATES