Searching for Yield
The BoJ’s latest stimulus has ignited a rally in the domestic stock market, and also lifted global bond markets. Since the BoJ’s announcement, widespread yield curve flattening has been seen in many countries, with dramatic declines in long-term government bond yields. Countries with strong currencies and higher yields, such as emerging markets and European peripheral nations, have enjoyed strong gains in government bond prices. Further depreciation of the yen will likely incentivize Japanese investors to chase higher yields in oversea markets, and we can anticipate additional fund flows out of Japan and into global bond markets.
SELECTED COUNTRIES’ 10-YEAR GOVERNMENT BOND* PRICE RETURNS SINCE THE BOJ’S ANNOUNCEMENT OF NEW ASSET PURCHASE PROGRAM