Monday February 8, 2016 - 17:32:47 GMT
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OPINION: Yen Strength Revisited
John M. Bland, MBA, CTA
The reaction to the Bank of Japan decision to impose negative interest rates on sliver of deposits held at the central bank has worn off quickly as I had expected. Sometimes central banks make policy decisions geared to making headlines to shock the markets. They never last. I wrote: "I have been asking myself what has changed with the BOJ decision. Negative interest rates only apply to a narrow slice of bank deposits at the BOJ and and as for the additional QE, the yield on the 10-yr JGB has fallen from 0.22% to 0.10%. None of us are banks and those who were investing at 0.22% are unlikely to be impacted by a 0.10% yield. The BOJ decision was all about headlines. I think the impact of the headlines should wear off quickly."
Note in the chart above that the yield on the 10-yr JGB (Japanese Government Bond) has fallen today to a scant 0.38%. I expect these yields to turn negative at some point in the near future. JPY demand appears to be coming from capital repatriation due to falling global equities. Until these markets stabilize, the JPY will remain in demand much to the consternation of Japanese monetary officials.
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