Recap 5-14-13


The jump in Japanese bond yields (+26bps in 3 days) has gotten a lot of attention:

Several commentators have noted that this has substantially narrowed the US-Japan yield differential, (orange) which should prompt Japanese asset managers to switch back to JGB’s, and hence, put downward pressure on USD vs Yen. (white) However, it is worth nothing that with the BoJ more constrained by the zero bound, the nominal yield differential does not tell the whole story. In particular, note that the real yield (purple) and implied inflation differential (green) both tell different stories – and in addition, has been a more useful indicator for USDJPY since the BoJ meeting.

Note that 10 years ago, there was a similar move in JGB yields. The initial move lasted 4 months… and well over 100bps. Also note that the starting yield level was similar:

Separately, this WSJ headline says a lot regarding positioning:

Investors increasingly are shorting the AUD against a long Mexican peso. The AUD is considered vulnerable thanks to sinking commodity prices and cooling Chinese demand while the Mexican peso could be insulated thanks to the relative strength of the US economy.

Finally – apparently some people are genetically programmed to feel good while watching boring videos. And it’s a thing. Maybe.

Imagine if everyone had this. Bye bye Hollywood. The entire primetime Television lineup would be people folding towels and ironing. How’s that for a dystopia?


  • German Zew was stable at 36.4 vs 40 exp
  • JGBs hit the limit down level for the third night in a row.

Upcoming Data:

  • Wed : Japan Consumer Confidence, UK Jobless Claims, EU 1Q GDP, BoE Inflation Report, US Empire Mfg, NAHB Housing Mkt Index, Japan 1Q GDP,
  • Thu : EU Trade Balance, US CPI, Jobless Claims, Housing Starts,
  • Fri : Canada CPI, Mexico GDP, US UMichigan Confidence
  • Mon: Chicago Fed National Activity Index, RBA Minutes
  • Tue: UK PPI, CPI, Dudley Speaks, Japan Merchandise Trade Balance, Australia Westpac Consumer Confidence