Abe postpones sales tax; JGB yield poised to jump

Below is chart of $/yen (orange line) and JGB yield (white).  Also included is NKY (Nikkei in green) although it trades very closely with the currency.  Today it was announced Abe is considering delaying implementation of the sales tax, causing $/yen to trade above 116.

 In late 2012, the yen started to depreciate in earnest due to QE, and the move just accelerated to new highs based on the massive increase in QE announced Oct 31.  Though JGB’s had a yield spike higher in Q2 2013, the yield is now only 49 bps, as the BoJ will essentially buy ALL of the new issuance.  However, given the trend in the currency it might be worth considering what the market currently deems implausible, that is, shorting JGB’s…  the widowmaker!

JGB_yen_2014Halfway back between June 2013 high and the recent low in the yield is 68 bps.

Posted on November 12, 2014 at 4:42 am by alexmanzara · Permalink
In: Eurodollar Options

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