Yen swap spreads point to 'bear market flattening'

Aihucha News, September 14: The focus of speculation about the Bank of Japan’s policy changes has shifted to the front end of the yield curve, with long-term bonds being more favored than short-term bonds. Ahead of Bank of Japan Governor Kazuo Ueda's interview on September 9, the main focus in the bond market has been the fate of the 10-year Treasury yield cap. Now, the possibility that negative interest rate policies may end is even more compelling. Two-year swap spreads have widened more than other maturities since the weekend interviews, suggesting investors are betting on higher yields on two-year bonds or that holders of those bonds have made hedging swaps. The lack of two-year bond futures, unlike 10-year bonds, also means that funds are more concentrated in swaps. This suggests the yield curve will flatten by the end of the year.