Pension Funds And Central Banks Vie For Bonds With Rising Prices

The Bank of Japan (BOJ) won’t unveil any action in the near term as the market digests its shift to a yield-targeting policy framework, believe analysts at Goldman Sachs. However, Allison Nathan and team said in their October 6 research piece titled “Central Bank Choices and Challenges” that the rate cuts will likely serve as a backstop against sharp yen appreciation.

BOJ's new policy framework will address market’s JGB scarcity concerns

After analyzing Quantitative and Qualitative Easing (QQE) initiatives for the past three years, Rohan Khanna, a rates strategist at GS, notes that the BOJ holds around 40% of outstanding JGBs, including about 40% of bonds with a residual maturity of less than 10 years. In light of such substantial holdings,...