Skip to content

Big Short on Japan Bonds Show Signs of Turning as Demand Returns

  • Foreign short-covering may push Japan yields even lower
  • Sales of overseas bonds gives domestic funds scope to buy
The Bank of Japan (BOJ) headquarters in Tokyo.

The Bank of Japan (BOJ) headquarters in Tokyo.

Photographer: Toru Hanai/Bloomberg
Updated on

Bond vigilantes betting against Japanese sovereign debt may soon be tempted into a complete change of heart, given the size of the yields they now offer and the improving sentiment.

Dollar-based funds get a currency-hedged yield of 4.30% on Japan’s 10-year bonds this week, a healthy premium to the 2.80% or so on equivalent Treasuries. The securities look set for further gains with both foreign and domestic investors seen returning to a market where the central bank has often been the only buyer this year, according to strategists.