Ja Japanese long-end government bonds Loading... : Investor Sentiment and Bull/Bear Views

The market has gone too far: the front end prices about four hikes and the long end prices steepness consistent with 750 basis points of hikes, leaving the bond market at maximum pain. JPMorgan was buying 30-year, 10-year, and 20-year bonds after the long end of the US, Japan, and Australia backed up too far. Central banks establishing credibility, starting with the ECB, then the Fed, and expected Bank of Japan, plus the US Treasury Secretary's efforts to stabilize the long end, are the first ingredients; Middle East stabilization is the second. With nominal and real yields at JPMorgan's levels and simply too cheap, this is a good buying opportunity.

The long end of the Japanese government bond curve is selling off sharply—30-year yields rose 38 bps in two sessions—on proposals for snap elections and increased fiscal assistance. This is making Japan a source of global bond-market volatility and could reinforce the sell-America trade in US Treasuries.

The Japanese long end matters globally: if long-end JGB yields continue to creep higher, they could push global yields higher because Japan's long end has acted as a lower bound for global yields. This is a key setup to watch for cross-asset rates risk.