Flash: JGB volatility continues to hold foreign mystique – UBS

FXstreet.com (Barcelona) - A bond market is usually headed for trouble when foreigners suddenly flee. So far though there has been no sign of this in Japan despite the recent surge in JGB volatility. In fact, overseas investors have been net buyers of JGBs since the BoJ announced bold easing measures on April 4.

What can explain their loyalty to Japanese fixed income? Previous episodes of QE elsewhere have taught investors to put long-term inflation concerns to one side, and focus instead on the here and now. According to Research Analyst Gareth Berry at UBS, “It was a profitable strategy in the past to buy Gilts and USTs before the Bank of England and the Fed did. Presumably foreign investors are now applying this lesson in Japan.”