BOJ not panicking as JGB yields volatility “normal”

The Bank of Japan’s nonchalant approach towards recent volatility in the government bond market has left investors feeling let down, but a look at historical yields could tell you just why the central bank isn’t panicking yet.

“The [10-year Japanese government bond] yields at 85-90 basis points are exactly in line with the full year average of 2012. We’re hardly in unexplored or dangerous new territory here,” Michael Kurtz, global head of equity strategy at Nomura, told CNBC Asia’s “Squawk Box” on Wednesday. Over the past decade, Japanese government bond (JGB) yields have averaged 1.3-1.4 percent, he added.

While 10-year JGB yields briefly rose to 1 percent in late-May, they have since fallen back into the 0.8-0.9 percent range. The concern for investors is that a rapid rise in bond yields could significantly increase the interest payment burden for the highly indebted government. Japan’s government debt is estimated to reach 245 percent of gross domestic product this year – the highest in the world.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu