HALISTER1: JAPAN RATES WEEKLY: Yen Gains Spur BOJ Bets, Supporting Bonds

JAPAN RATES WEEKLY: Yen Gains Spur BOJ Bets, Supporting Bonds

(Bloomberg) -- Yen is set for the longest weekly advance in three years, buoying Japanese govt bonds amid rising speculation BOJ will expand monetary stimulus.
  • Click here for a weekly change in the sovereign yield curve and here for a market snapshot
  • USD/JPY has fallen 1.2% since Aug. 12, poised for a fourth weekly decline; that would be the longest losing streak since June 2013
  • July nationwide CPI data due Aug. 26 will be the last inflation report before BOJ’s next meeting on Sept. 20-21 when the central bank’s comprehensive policy assessment will be presented
    • Etsuro Honda, an adviser to Prime Minister Abe, sees “bold” BOJ action next month, he said in interview with WSJ
  • Finance ministry to auction 1.1t yen of 20-yr bonds on Aug. 23
  • The ministry will also sell 500b yen worth of JGBs at additional auction on Aug. 25 with remaining maturities of 5-15.5 yrs
  • WHAT THEY SAY
  • MassMutual Life Insurance (Satoshi Shimamura, head of rates and markets at investment strategy department)
    • BOJ’s comprehensive policy review in Sept. is more likely to ensure continuation of the current policy and coordination with the govt considering the weak stocks, stronger yen and rising bond issuance
    • The appreciation pressure on yen amid the dollar weakness will support the bond market
  • Barclays (Naoya Oshikubo, rates strategist)
    • Concern has eased that BOJ will scale back easing
    • It looks as though BOJ won’t be able to avoid expanding stimulus including a rate cut as yen continues to rise
  • PineBridge Investments Japan (Tadashi Matsukawa, head of fixed income investment)
    • If 20-yr bond issuance is absorbed smoothly, the sovereign curve is likely to flatten especially given a large amount of JGB redemption in Sept.
    • The market appears to have started to price in a possible increase in BOJ’s bond purchases
    • NOTE: JGBs worth 19.4t yen will mature in Sept., according to Bloomberg data
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Etsuro Honda (Japan)
Naoya Oshikubo (Barclays PLC)
Satoshi Shimamura (Massachusetts Mutual Life Insurance Co)
Tadashi Matsukawa (PineBridge Investments Holdings US LLC)

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