Fixed Income Commentary

This report examines the potential for a trend reversal in the 2s10s JGB yield spread following the BoJ's June meeting. The author advises patience regarding flattener trades, citing uncertainties around policy expectations and potential government influence.

Key Takeaways

• 1.The JGB yield curve is at a crossroads between a steepener and a flattener, with the outcome contingent on the BoJ's stance on future rate hikes.
• 2.Market expectations for a slow pace of BoJ rate hikes may be influenced by perceived government pressure on the Bank.
• 3.Investors are advised not to rush into flattener trades, as confirmed market trends should be waited for based on historical European and US precedents.

Table of Contents

• Intriguing RV graphs: Yield curve steepener or flattener after BoJ's June meeting
• Will 2s10s JGB yield spread trend reverse after BoJ's June meeting?
• Trend reversal possible depending on BoJ's stance on rate hikes; BEI just over 2% also suggests new trend approaching
• Perceived government influence on rate hikes could delay a trend reversal
• Even amid difficult conditions, we see no need to rush into flattener trades
• Appendix A

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