Negative-yielding debt suggests overextension
Over the last nine months the outstanding amount of government bonds worldwide with negative yield has increased by $5.4trn to $11.7trn (using the latest daily estimate), homing in on the $12.2trn record set in June 2016. The majority is accounted for by Japan,...A Yield Curve Inversion: Will it Happen Before the Next Recession?
Recessions are like death – it’s not a matter of if they will happen, but when. Morbid? Perhaps, but as Steve Jobs put it, “Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life… death...Cost of FX Hedging Pushing Yen Higher for Now
One of the strongest performers against the USD lately has been the yen, with USDJPY now probing 15-month lows. One of the main drivers has been the surging cost of FX hedging (assume rolling 1 year FX forwards). The top-left chart shows the pick-up for a yen investor...Sovereign CDS Spreads Highlight Low Risk Premia
Much in the way that monetary stimulus has turbocharged equities, unprecedented low interest rates in developed and emerging markets have artificially compressed credit default swap spreads. As the charts below show, CDS spreads are anchored at the bottom end of the...BoJ to Keep Loose As No Immediate Sign of Target CPI
The set-up in Japan continues to favour a weaker yen. Inflation is coming, but the BoJ will want to be sure the train has arrived at the station before stepping off at the monetarytightening platform. The top-left chart shows the lagged effects of a weaker yen should...BoJ Underscores Support for USDJPY
Data and policy continue to line up for a weaker JPY. Kuroda has re-iterated his commitment to stimulus, stating, “it’s premature to discuss in an exact way about exit strategy”. Kuroda continues his battle against the deflation mindset; and, as the top chart shows,...Buy USDJPY Dips
Fundamentals in Japan still support a weaker JPY. Yield differentials are one of the most important drivers of currencies and, as the top chart shows, this shows that USDJPY is becoming stretched to the downside. Also, as we highlighted in our Themes for 2017, the...Japanese Equity Flows Diverge
October saw the BoJ’s announcement of increased stimulus, coordinated with the new targets for the GPIF, 25% each for foreign and domestic equities (up from 12% each), and a decrease in JGBs, from 60% to 35% of holdings. Investors, both Japanese and foreign, have...Company Story
