Rates Strategy Weekly: Curve Implications of Iran Peace Negotiations

Mizuho analyzes how progress in US-Iran peace negotiations could lower global rates while noting that persistent BOJ rate hike expectations will limit the decline in JGB yields. The report also highlights the negative supply impact of Japan's proposed 'bridging bonds'.

Key Takeaways

• 1.An agreement in the Iran conflict and normal operations in the Strait of Hormuz will likely put downward pressure on global rates, but a significant decline in JPY rates is unlikely due to persistent BOJ rate hike expectations.
• 2.The Bank of Japan is likely to maintain its tightening bias, with a June rate hike probability currently priced at just under 80% by the market.
• 3.The Japanese government's proposal to issue 'bridging bonds' for growth and crisis management is viewed as having a negative impact on the bond market due to increased near-term supply pressure.

Table of Contents

• (1) Curve implications of progress in Iran peace negotiations
• (2) Assessing rates impact of "bridging bonds" proposal
• DEVELOPMENTS THIS WEEK AND IMPLICATIONS FOR RATES OUTLOOK
• SHORT-TERM OUTLOOK (ONE WEEK – ONE MONTH)
• MEDIUM-TERM OUTLOOK (SEVERAL MONTHS – ONE YEAR)
• Risk scenarios
• (3) Yen rates relative value and investment strategies
• RELATIVE VALUE SCORE TABLES

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