Basis Trade Is Back in Japan’s Bond Market as BOJ Meeting Nears
- Futures gain amid speculation of arbitrage with cash bonds
- BOJ’s lending of government debt surges to record on Monday
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An arbitrage trade that rattled Japan’s bond market last year looks to be back.
The spread between the prices on Japanese 10-year debt and similar-maturity futures has swelled in recent weeks, providing room for so-called basis trades that try to take advantage of the difference. The gap widened as the Bank of Japan bought bonds to support prices in an effort stave off growing wagers that its yield-curve-control policy will end as soon as its meeting this week.