10-Year Yield Dropped, Japanese Investors Losing Their Appetite?
10 year yield fell -0.012 to close at 2.859. And if dollar doesn’t reinforce, Japanese investors won’t be interested in purchasing the US bonds. Hideaki Kuriki (Tokyo-based chief fund manager) stated: “Japanese investors were buying Treasuries when a rise in yields was pushing up the dollar, but that correlation started to break down in December". He added: “If Japanese investors could be convinced that they could offset the risk of a rise in Treasury yields by gains in the dollar, then they could start investing in unhedged U.S. Treasuries".
Last week, however, yields rose from the minimum to 2.95%, which was near its 3-year maximum. Investors attribute this surge to concerns about heating inflation and expanding US deficit. That’s why, the correlation between the yields and dollar was ruined.
Still, some economists, such as Shinji Hiramatsu (general manager of the fixed-income investment department in Tokyo), assume that the rise might still draw buyers’ appetite. Akio Kato (general manager of trading at Mitsubishi UFJ Kokusai Asset in Tokyo) insists that if 20- and 30-year JGB keep falling and US Treasuries increase, the greenback would weaken and local investors will shift to unhedged bond. Yesterday, Japanese 10-year yield fell from the maximum of 0.095% to 0.045%. Today, the 20-year yield declined from 0.60% to 0.555%.