Germany's Yield at 7-Month High Versus Japan's Before BOJ Meets

  • Spread is too wide given monetary easing of ECB, BOJ: Mizuho
  • Twenty-three of 41 analysts expect BOJ easing on April 28

Germany’s yield premium over Japanese government bonds reached the widest since September amid speculation the Bank of Japan may ease policy again this week.

Even after the European Central Bank kept its stimulus unchanged last week, both institutions are engaged in unprecedented asset-buying programs and negative interest rate policies in efforts to revive growth and inflation. The 10-year bond-yield difference is too wide, according to Mizuho International Plc. The spread should narrow after the BOJ’s decision on April 28 as low JGB yields make foreign bonds more attractive to Japanese investors, said Peter Chatwell, head of rates strategy at Mizuho in London.

The yield spread “is at the high of its one-year range and nothing has changed at the fundamental level,” Chatwell said. “With inflation and growth outlooks still shaky for Europe and Japan, and the central banks still firmly in easing mode, this widening of the spread is likely to be seen as a good bund-buying opportunity.”

Benchmark German 10-year bund yields rose four basis points, or 0.04 percentage point, to 0.30 percent as of 4:45 p.m. London time, the highest since March 16. The 0.5 percent security due in February 2026 declined 0.36, or 3.60 euros per 1,000-euro face amount ($1,133) to 101.925.

Similar-maturity JGBs yielded minus 0.105 percent in Tokyo, making the gap versus bunds 40 basis points. That’s the most on a closing-price basis since September.

Twenty-three of 41 analysts surveyed by Bloomberg expect Japan’s policy makers to expand stimulus this week. Japanese Prime Minister Shinzo Abe’s economic adviser said on Tuesday that this week’s meeting is the time for the BOJ to act if it wants to be preemptive.

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