Japan's Bond Volatility Fuels Global Market Concerns
Recent turbulence in Japan's bond market has drawn widespread global attention. Citi warns that rising volatility in Japanese bonds could spill over into other asset classes, particularly US Treasuries, and advises portfolio reductions.
Potential Massive Bond Sales by Risk Parity Funds
Mohammed Apabhai, Citi's head of Asian trading strategy, notes that risk parity funds may need to sell up to a third of their current exposure. In the US alone, this could trigger bond sales of up to $130 billion.
Domestic Policy Shifts Trigger Market Shockwaves
Japanese Prime Minister Yoshiko Nishida's campaign pledge to cut food taxes has sent long-term bond yields soaring. Thirty- and 40-year Japanese government bond yields surged over 25 basis points on Tuesday, hitting record highs. With early elections set for February 8, concerns over policy uncertainty are intensifying.
Liquidity Indicators Reach Record Levels
On Tuesday, a key measure of Japanese bond liquidity climbed to a record high, reflecting widespread 'buyer's strike' sentiment in the market as traders remain cautious about further purchases.
- Japanese bond yields surge, triggering global ripple effects
- Risk parity funds may offload massive bond positions
- Domestic policy changes amplify market volatility
- Deteriorating liquidity conditions raise concerns