Five year JGB yields hit record lows

Tuesday, January 13, 2015

Asian markets experienced further risk aversion during overnight trading as sliding oil prices struggled to find a floor, depressing appetite for risk assets across the region. Yields on 5 year bonds issued by the Japanese government reached a record low, touching 0.005% as investors rushed to safe havens as current market conditions have been exacerbated by the Bank of Japan’s aggressive focus on achieving its 2% inflation target which has created significant tightness in recent months. Five year yields have dropped sharply over the past few months, from 0.185% at the start of November to the current near zero rates seen during overnight trading.

The yen traded towards a four week high, trading towards 117.74 against the dollar before erasing these early losses as we neared the European open. Speculation that policymakers will go ahead with stimulus measures, which will further weaken the currency, saw support levels reaffirmed around the 50 day MA towards 118.40 early on this morning with the recent two day rally in JPY seen by many as a buying opportunity.

Chinese buyers took advantage of lower oil prices in December, importing record levels of crude oil as overseas purchases increased to 30.4m tonnes or roughly 7.19m bpd, up from the previous high of 6.81m bpd seen in April last year. The lower prices saw the trade balance post a surplus of $49.61 in December, coming in slightly above expectations of $49bn as lower crude prices offered both importers and exporters some temporary reprieve from the otherwise lacklustre demand outlook. Imports fell 2.4% y/y, significantly less than the -6.2% y/y figure expected by market participants while export growth exceeded expectations, rising 9.7% y/y in December from 4.7% y/y the previous month which also came in better than expectations of a 6.0% y/y increase.

Japanese bond yields drift towards zero

GJGB5 Index Japan Govt Bond Yea 2015 01 13 07 24 03

JPY erases early gains agains the dollar

JPY Curncy Japanese Yen Spot 2015 01 13 07 31 23

Chinese exports rally as oil prices plummet

CNFREXPY Index China Export Tra 2015 01 13 07 42 10

Events for today

0001

UK

Dec

BRC Retail Sales

0930

UK

Dec

CPI & PPI

1500

US

Jan

IBD Sentiment

1900

US

Dec

Fed Budget

Topics: JPY, BoJ, Trade Balance
More from: Kash Kamal