The spread between the U.S. and Japan 10-year benchmark yields is narrowing after reports of wage negotiations and BoJ central bank chatter. The differential above 350bps did not hold steady and the recent dip in U.S. Treasury yields has trimmed the advance
Meanwhile in FX, USD/JPY is currently trading at around 148.0, and while rate differentials correlate strongly, it is not the only reason behind spot moves. However, looking at a 2-year regression between UST-JGB spreads and USD/JPY, the current rate differential is tied with dollar/yen trading closer to 142.0
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