RegionsAsia PacificYields on Japanese government bonds fall in post-Brexit turmoil

Yields on Japanese government bonds fall in post-Brexit turmoil

The yield on Japan’s 20-year government bond is near zero and could turn negative for the first time.

The yield on 20-year Japan government bonds (JGBs) has fallen to a record low of 0.04% and the benchmark 10-year yield is further below zero at a negative -0.225% as investors seek “safe havens” following the shock outcome of the UK referendum on membership of the European Union (EU).

The vote for ‘Brexit’ has accelerated the fall in JGB yields, which began in January when the Bank of Japan (BoJ) announced negative interest rates. The country is following a similar path to Germany, Australia and Switzerland, where yields on benchmark 10-year bonds are all at record lows and Germany’s 10-year bund fell below zero this month.

Positive yields are becoming increasingly rare in the sovereign bond market. All JGBs of 15 years and shorter durations already offer negative yields; the unrest caused by the Brexit vote has raised expectations that the BoJ will announce further monetary easing and push yields even lower. Analysts have forecast that the 20-year yield could soon turn negative and the yields on 30- and 40-year JGBs could also reach zero or turn negative.

A Financial Times report suggests that Japan’s life insurance companies are still buying JGBs as they “no longer care about the yield” and are instead buying for the duration of the notes “effectively locking-in their cash as a minimum and assuming that things stay bad for a long time.”

The BoJ’s next policy meeting is scheduled for July 28-29, but the central bank’s governor, Haruhiko Kuroda said that it would take whatever action it deems necessary to counter the market turmoil caused by the Brexit vote. He declined to comment on speculation that the BoJ might call an earlier emergency meeting.

Meanwhile, the Japanese yen (JPY) has risen to long-term highs as it is considered a safe-haven asset. However, a strong currency runs counter to prime minister Shinzo Abe’s initiative to revive the Japanese economy.

Related Articles

China’s regulatory changes stimulate international interest

Asia Pacific China’s regulatory changes stimulate international interest

3m Michael McCaw
Singapore Fintech Festival day four – Investor Summit Deal Day

Asia Pacific Singapore Fintech Festival day four – Investor Summit Deal Day

6m Richard Hartung
Singapore Fintech Festival day three: trade finance, capital markets and financial inclusion

Asia Pacific Singapore Fintech Festival day three: trade finance, capital markets and financial inclusion

6m Richard Hartung
Singapore Fintech Festival day two: blockchain, India's digitalisation and the future of banking

Asia Pacific Singapore Fintech Festival day two: blockchain, India's digitalisation and the future of banking

6m Richard Hartung
Is Asia too risky for corporate investment?

Asia Pacific Is Asia too risky for corporate investment?

6m Richard Hartung
GTreasury & Visual Risk announce partnership to focus on integrated treasury and new markets

Asia Pacific GTreasury & Visual Risk announce partnership to focus on integrated treasury and new markets

8m Guest Writer
Singapore shipping groups to trial blockchain

Asia Pacific Singapore shipping groups to trial blockchain

9m GTNews
IMF warns China on growing debt load

Asia Pacific IMF warns China on growing debt load

9m Graham Buck