Trader Dan Norcini
The
mystery, at least in my mind, of the rising Euro is now clear. Outflows
of Japanese institutional money is pouring into the European bond
markets in search of higher yield.Consider the following – the yield on a 10 year Japanese government bond has fallen to 0.525%. Yes, that is not a typographical error. If you buy one of those things, you are locking money up in an IOU for TEN YEARS to obtain a half a percentage point of interest. If that is not bad enough, the underlying currency is also freefalling in value. Now, who in the world would want to do that besides the monetary authorities in Japan who are becoming and likely are going to end up staying that way, as the largest, if not sole buyer of Japanese government debt?
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