Mark Dowding, one of loudest bears on Japanese bonds, says the selloff initiated by the Bank of Japan’s policy tweak has further to go.
(Bloomberg) — Mark Dowding, one of loudest bears on Japanese bonds, says the selloff initiated by the Bank of Japan’s policy tweak has further to go.
As chief of investments for RBC BlueBay Asset Management, Dowding has been among those convinced that the Japan would have to abandon its ultra-loose monetary policy. The trade, known in financial circles as the widowmaker because it’s burned investors for years, is now vindicating funds that bet against Japanese bonds.
Prices tumbled on Friday, sending 10-year benchmark yields to a nine-year high, after the central bank announced that it would loosen its grip on bond yields and allow rates to rise beyond a certain level. It’s a move that investors have interpreted as an initial step to withdraw the extraordinary stimulus that’s made Japan an outsider in global markets.
“It’s clear that Ueda does not want yields to move too quickly,” Dowding said, referring to the central bank chief. The “BOJ will manage volatility and seek to curb speculation.”
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BlueBay first entered the trade in 2022, when the 10-year yield was at 0.23% — less than half the level from today. Since March, the position was the maximum allowed by the fund, he said.
Dowding said he would consider trimming the position when the 10-year yield reaches 0.75%, which may happen in the next three weeks.
He sees Japan’s central bank scrapping yield curve control, the controversial cornerstone of the country’s monetary policy by October and yields eventually rising to 1.25%.
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