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16 Apr 2013
Forex Flash: Recent Sovereign Bond price action in anticipation of Japanese developments - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts believe that a good part of recent price action in sovereign bonds and emerging markets has been done in anticipation of what Japanese investors might do given that the BoJ is going to be buying 70% of new issuance through the end of the year.
They see that the available data from the MOF showed Japanese investors were net sellers of foreign bonds in the week ending April 5 as they have done nearly every week this year. Further, in the CME currency futures for the week ending April 9, speculators reduced gross short and gross long yen positions in roughly equal amounts, leaving substantial gross and net short yen position. They write, “In addition, since the BOJ's announcement on April 4, it appears that the yen tended to strength in the Tokyo session, though in margin trading, it appears there has been yen selling.”
They see that the available data from the MOF showed Japanese investors were net sellers of foreign bonds in the week ending April 5 as they have done nearly every week this year. Further, in the CME currency futures for the week ending April 9, speculators reduced gross short and gross long yen positions in roughly equal amounts, leaving substantial gross and net short yen position. They write, “In addition, since the BOJ's announcement on April 4, it appears that the yen tended to strength in the Tokyo session, though in margin trading, it appears there has been yen selling.”