Wednesday, May 5, 2010

Japanese Government Bonds - How high?

Monthly JGBs prices chart shows we are back to the 1998 highs.
So 12 years of deflation and low interest rates and we are right at the same spot. However with the increasing Sovereign Debt risks (PIGS) and the high ratio of government borrowing in Japan how high can JGBs go before bond vigilantes take matters in their hands?

I see USTs are going higher and yields down but in the case of the rising Sov debt risk shouldn't we be seeing bond selloff as investors should demand better yield to compensate them for the default risk?

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