Brendan Murphy is short Japanese 10-year JGB futures, believing it’s only a matter of time before the Bank of Japan tightens monetary policy.
Murphy, a money manager at Insight Investments, which manages more than $880 billion in assets, said yields were capped by rigid BOJ policy amid rising price pressures. Bearish on annual bonds. He is bullish on 30-year bonds, which are not subject to the Bank of Japan’s yield curve control (YCC).
“We think the YCC will be lifted,” Murphy said in an interview last week. He said the BOJ’s policy “will gradually move towards normalization,” adding that the BOJ “does not want to be accused of tightening too quickly and reverting to a disinflationary environment.”
Market movements show that many parties agree with Mr. Murphy’s view. The bond market fell on the 14th, and the long-term interest rate temporarily rose to 0.485%, the highest level since March 10th. 10-year note futures fell to a four-month low.
Bond bears are likely to gain more momentum. The BOJ is likely to revise its outlook for the consumer price index (core CPI, excluding fresh food) for fiscal 2023 to the 2% level at its monetary policy meeting this month, according to multiple sources familiar with the matter. I figured it out.
Furthermore, former Bank of Japan Director Hideo Hayakawa (Chief Fellow of the Tokyo Foundation Policy Research Institute) said in an interview on the 13th that there is a possibility that the Bank of Japan will make policy revisions at this month’s meeting to expand the fluctuation range of long-term interest rates in the YCC. He expressed his opinion.
“Inflation is high,” Murphy said. He said the BOJ “may start tightening within the next two quarters, not necessarily next month.”
Here are some of Murphy’s other thoughts
Preference for emerging market bonds denominated in local currencies such as South Korea, South Africa and Mexico Developed markets prefer sovereign bonds from countries closer to policy easing such as New Zealand The US Federal Reserve is likely to raise rates one more time and then remain on hiatus
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news-rsf-original-reference paywall">Original title:An $880 Billion Fund Is Shorting Japan’s Key Bonds In BOJ Bet(excerpt)
2023-07-17 23:35:00
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