While the floor continues to fall out of the equity markets, the queue to buy bonds lengthens. Consequence: the yield on ten year bonds hits another historic low, and deflation expectations become more entrenched than ever.
The yield on the benchmark 10-year Japanese government bond hit a historic low on Monday, as investors flocked to the safe haven of JGBs after the stock market closed at a new 20-year low.
The 10-year JGB was up 0.23 at 100.42, pushing the yield down 0.025 to 0.655 per cent, a record low. The key 10-year JGB futures contract was down 0.03 at 143.09. The yield on the 20-year JGB also fell to a record low of 0.995 per cent.
Japanese stocks plumbed a new 20-year low on Monday, as downward pressure was exacerbated by pension-fund selling. The benchmark Nikkei 225 average was off 0.8 per cent to 7,795.49, as shares continued their decline for a fifth straight session.
Investors are looking ahead to Thursday's Y800bn auction of 20-year JGBs, with an expected coupon of one per cent. Demand for the issue is expected to be robust, amid a dearth of other attractive investment opportunities.
Source: Financial Times