Fresh Appetite For Japanese Domestic Investors
After Bank of Japan started considering raising rates, Japanese bond yields rose but weren’t able to draw hundreds of billions of dollars worth of Japanese investment in overseas debt to return to Japan. 10-year bonds traded at 0.2%, creating an appetite for domestic investors.
Some think that the 30-year yields might rise to 1% and attract yen-based investments in U.S. and European debt. And it yen appreciation increases as well, operating overseas will be more expensive and yen will be invested in JGBs.
A portfolio manager at AllianceBernstein in Tokyo, Masahiko Loo, claimed: "If 30-year JGBs sell off to 1 percent, we think that Japanese investors will definitely be repatriating some of their foreign assets back to JGBs".
Considering a short-term policy rate, and 10-year bonds trading near 0.13%, Japan is one of the lowest yielding markets globally.