Global currency and interest-rate markets are heading into a massive change as rising Japanese yields are luring domestic investors to park their money at home at the expense of holding foreign assets, according to RBC Capital Markets.
"For the first time since 2020, Japanese investors will have yields attractive enough to invest at home,” Richard Cochinos, a currency strategist at RBC Capital Markets in New York, said in a Wednesday note. "At a point in the not-too-distant future, Japanese investors will be indifferent from buying anywhere on the Japanese government bond curve versus U.S. Treasuries.”
The increasing rate earned on Japanese government debt has been a key focal point of global investors — and highlighted as a risk to demand for U.S. bonds — since Bank of Japan officials shifted away from ultra-easy monetary policy more than a year ago. Nonetheless, foreign demand for Treasurys has proved altogether sticky and a recent surge in long-term Japanese yields has outpaced major peers, dragging the returns that come from owning the securities.
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