10-year JGB yields threaten near three-year low as global bond yields continue to fall

10-year Japanese government bond yields are at their lowest since March, near -0.10%, threatening a fall to its lowest level since September 2016

10-year JGB

  • US yields fell hard overnight – Asia following along. Australian 10 year yield under the cash rate.
  • US 10-year Treasury yields fall to lowest level since October 2017
Bond yields continue to be a key focus area in trading today after we saw US yields tumble overnight. Today, we already saw Australia 10-year yields fall below its cash rate for the first time since 2015 and New Zealand 10-year yields hit a record low as well.
And in Japan, we’re now seeing 10-year yields about to eclipse its March low of -0.10% and hit its lowest level since September 2016.
US-China trade tensions and global growth worries continue to be the key driving factors in the background and given that the outlook is still rather uncertain/cloudy, there could potentially be more pain to come for risk assets.
I made a few mentions earlier in the year that I expect the yen to make a push for being an outperformer in 2H 2019 given the backdrop of a US-China trade deal holding little meaning and that global economic conditions will continue to deteriorate.

“In the bigger picture, I still view that the pair will favour the downside more than it should the upside considering global growth momentum. However, that is likely more of a story for 2H 2019 than the present.” — USD/JPY @ 111.90 in March

However, with a trade deal completely off the table now, I reckon there is a strong case for bringing forward that argument over the next few months.
With Chinese economic data already showing considerable signs of weakening in Q2 and US Q2 GDP forecasts being slashed to almost just 1% now, it’s only a matter of time before this theme starts gathering focus and spread fear across markets.
When it comes to trades like these, there isn’t much planning involved because it is more of a matter of gauging when greed turns into fear (shift in risk sentiment). And such an event can happen like a quick flip of the switch more often than not.