Two Key Reasons Yen Is Suddenly Surging: 3-Minutes MLIV
Speakers
Tom Mackenzie
— Anchor, Bloomberg
Paul Dobson
— Executive Editor, Bloomberg
Summary
The video discusses two key reasons behind the yen's sudden surge: hawkish BOJ rate-hike expectations and speculation that GPIF may repatriate into Japanese bonds. It also covers the global bond outlook, with yields expected to grind higher as developed-market central banks keep hiking. Asian tech volatility is dismissed as noise.
- Yen is gaining tailwind from BOJ hike speculation beyond 25bp.
- GPIF repatriation speculation could add yen support.
- Global bonds were stable short term but yields are expected to rise further.
- Higher developed-market rates and central bank hikes support bond yield pressure.
- Lower oil prices helped the bond market pause.
- Asian tech volatility is viewed as nerves with no salient driver.
Ideas
Yen gains on BOJ, GPIF repatriation
The yen is getting a tailwind from background factors: a hawkish BOJ member left open the possibility of a bigger-than-25-basis-point or back-to-back hike, short-term rate markets are pricing beyond 25bp, and there is speculation GPIF may repatriate capital from US bonds back into Japanese bonds, giving yen bulls more confidence.
Yields rise further; bond prices fall
Global bond yields are likely to rise further because we are in a higher interest-rate environment, more developed-market central banks are likely to keep raising rates, and bond prices are grinding lower even though coupon income cushions holders. The move is gradual but points to continued downside for bond prices.
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Speakers: Tom Mackenzie, Paul Dobson · Tickers: FXY, TLT