Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Japanese Bonds Yield of Dreams?

Interest-Rates / Japanese Interest Rates Nov 11, 2015 - 02:25 PM GMT

By: EWI

Interest-Rates

Why Japan's long-battered bond market may be gearing up for a comeback

Saber-tooth tiger. Wooly mammoth. Japanese government issued bonds?

Well it's happened. After years of enduring an unrelenting bear market (marked by plunging yields and rising prices) -- the long-battered Japanese government bond has made it on to the endangered financial species list.


Asks one October 26 Reuters: "JGB's on the edge of extinction?"

The prognosis isn't looking good. In late October, the yield on the 10-year JGB plunged below .300% for the first time in six months. While everyone from Japanese retailers to foreign investors continue to abandon the JGB for other higher-yielding assets.

Which begs the question, why is Japan's bond market facing annihilation?

Well, according to the mainstream financial experts, the ultimate poacher of the JGB is the Bank of Japan itself. Huh?

Okay, here's where things get a bit complicated. And if you happen to need a cure for insomnia, by all means, pick up a book on the Bank of Japan's monetary policy changes and its impact on the value of long-dated securities.

But for the sake of time and sanity, here's a much simpler explanation: The introduction of quantitative easing (or QE) has brought about the collapse in bond yields. Namely, the Bank of Japan's commitment to buy government bonds by the fistful, all the while keeping interest rates at a historic 0%.

Even simpler: The BOJ buys bonds, their prices rise, and yields fall. (Because prices and yields of all bonds move inversely to each other.)

Here the news headlines go:

"The belief that the BOJ will carry out monetary easing pushed long-term yields below the .3% threshold." (Bloomberg)

"The yield on Japanese government bonds is almost nonexistent, due to the Bank of Japan's aggressive yen printing." (Reuters)

"Amidst the Bank of Japan's easing, Japanese interest rates are unlikely to rise. We have to look into diversifying our investments." (Reuters)

But there's one problem with this logic. If rate cuts and QE caused bond yields to fall -- then why did bond yields also fall amidst rate hikes and an absence of QE?

Here, we have a chart of the Bank of Japan's interest rate policy since 2006. Notice: In July 2006, the BOJ ended its zero-rate policy (in place since 2001), and embarked on its most radical rate hike campaign since the late 1980s -- until 2007.

During this time, however, the JGB yield turned down, not up -- as the conventional logic would suggest -- as the next chart shows:

So, clearly Japan's bond market is not following the cues of its central bank. But make no mistake, it is following a very clear pattern -- an Elliott wave one, and more.

Here, our October 2015 Global Market Perspective's three-part Special Report on Japan shows you how the 10-year Japanese Government Bond is not only adhering to a 69-year long Kondratieff cycle -- but also, to the most common Elliott wave pattern, a five-wave impulse which began in the 1960s.

Here is an excerpt from the Special Report:

"The monthly chart at right shows that yields remain within a trend channel that has mostly contained wave 5 (circle) over the past nine years. The upper line of the channel runs through the zero percent level in mid-2018. In theory, yields could fall that low. However, the momentum of the decline has already begun to register divergences-versus the 2003 and 2013 lows..."

"For those who follow Elliott wave analysis, the writing is on the wall: The next move Japanese stocks, interest rates, and the economy appears to be... in line with the Kondratieff Spring phase."

Remember the famous line from the movie Field of Dreams -- "If you build it, they will come."

If the 10-year JGB yields continue to build toward a major bottom, as our charts suggest -- then the opportunity of a lifetime will come for investors on the right side.

Now for the best part: From now until November 18, the entire 3-part Special Report on Japan is available to our Club EWI members.

Log in now to read our free report: "3 Reasons to Get Excited about Japanese Stocks" >>

Need a free password -- fast? Complete your Club EWI profile now and get instant access >>


About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in