JGBs: No Need To Panic (Yet)
A bond market is usually headed for trouble when foreigners suddenly flee. So far though there has been no sign of this in Japan despite the recent surge in JGB volatility. In fact, overseas investors have been net buyers of JGBs since the BoJ announced bold easing measures on April 4th. What can explain their loyalty to Japanese fixed income? Previous episodes of QE elsewhere have taught investors to put long-term inflation concerns to one side, and focus instead on the here and now. It was a profitable strategy in the past to buy Gilts and USTs before the Bank of England and the Fed did. Presumably foreign investors are now applying this lesson in Japan.
Click here to read the full report: UBS