posted at 00:50
Author Name: Mike Bird
Credit Ratings Agencies Are Slamming Japan And Investors Dont Care
Moody's downgraded Japan because it doesn't believe the country's public finances are sustainable, and S&P said they don't expect to get a proper deficit reduction plan from the government. Trading on Tuesday saw a spike in Japanese 10-year bond yields. That's used as a common measure of how much it costs a government to service its debt, and how sustainable its public finances are. A spike is what you'd expect if investors were losing faith in the government. The "Spike" barely registered for one simple reason: Japanese yields are the world's lowest: yesterday's jump raised yields from 0.42% to 0.43%. It was a 1.17% increase on paper, but a 1.17% increase on such a tiny figure barely registers. Japan's 5-year bond yields just touched a record low on Tuesday, according to Bloomberg. Investors seem to be betting on the fact that, whatever the sustainability of Japan's public finances, for the foreseeable future the Bank of Japan will be buying government bonds like it's going out of fashion. When they do that, it drives up prices and drives down yields, and there's no end in sight for the country's massive QE programme.

Posts Archive