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 ¡ª and highlighted as a risk to demand for U.S. bonds ¡ª 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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