Investors Have Missed on BOJ’s Benevolence

Investors that chose to fight the Bank of Japan’s effort to drive down sovereign bond yields are missing out on the best risk-adjusted returns in two decades.

JGBs returned 2.6 times the market’s volatility this year on an annualized basis, poised for the best year since 1993, according to data compiled by Bloomberg and the European Federation of Financial Analysts Societies. BOJ Governor Haruhiko Kuroda has said about 7 trillion yen ($68 billion) of monthly debt purchases will shrink Japan’s risk premiums.

Strategists have had to throw out fundamental analysis of bonds and the economy in the face of Kuroda’s binge. The 10-year yield of 0.5 percent on Aug. 15, the lowest globally after Switzerland, is negative 73 basis points in real terms indicated by the expected increase in the cost of living by inflation swaps. Societe Generale SA estimates the benchmark yield would be 80 to 90 basis points higher without quantitative easing.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.