Forecast on JGB 10-year yield (08.08.2010)
On this page I will give a 3-mth end of period forecast in a confidence range of 90%. This means in 1 out of 10 cases (means out of 10 mth) the forecast range will be to small. In order to verify and improve all forecasts will be recorded and breaches will be shown. As you can see my forecast predictability was not very good. I overestimated in tendency an upward of the curve.
(source for checking: www.nikkei.net)
Forecast: 30.09.2009 1.30% - 1.65% (end of June estimation) WRONG estimation: 30.09.2009 1.29%
Forecast: 31.10.2009 1.35% - 1.70% (end of July estimation) RIGHT estimation: 31.10.2009 1.405%
Forecast: 30.11.2009 1.30% - 1.65% (end of August estimation) WRONG estimation:30.11.2009 1.25%
Forecast: 31.12.2009 1.35% - 1.65% (end of September estimation) WRONG estimation: 30.12.2009 1.285%
Forecast: 31.01.2010 1.35% - 1.65% (end of October estimation) WRONG estimation: 29.01.2010 1.315%
Forecast: 28.02.2010 1.30% - 1.60% (end of November estimation) RIGHT estimation: 26.02.2010 1.30%
Forecast: 31.03.2010 1.25% - 1.55% (end of December estimation) RIGHT estimation: 31.03.2010 1.37%
Forecast: 30.04.2010 1.25% - 1.55% (end of January estimation)
Forecast: 31.05.2010 1.25% - 1.55% (end of February estimation)
Forecast: 30.06.2010 1.30% - 1.60% (end of March estimation)
Forecast: 31.11.2010 1.20% - 1.50% (08.08.2010 estimation)
Next update: end of September for end of December
In September after the election the direction is not clear. It seems that local banks and insurance companies still favor risk free JGB's and with the high liquidity in their books this seems to continue. A significant change will probably only happen in case the company investments come back and that dependes on the economic outlook and improvements made. A second source of change could be that banks and insurance companies will look for higher returns and more risky investments especially with investing in USD and EUR on the 5 to 10 year curve. Once one bigger player starts to do this the other will begin following. A strong curve widening would accelerate this development.
July will be a good test case for the direction of the JGB 10-year yield. The government will issue a significant amount of bonds ranging up to 40 years. Starting from 6th of July the yield should move in upward direction.
Update on JGB 10-year yield (12.07.2009)
During the last week the 10-year yield dropped below 1.30%. This move was together with a weaker EUR against the yen. It will be interesting to see, if this phenomena will continue.
Update on JGB 10-year yield (29.07.2009)
The JGB curve is steepening. Interesting to see is that the 3-month rates are continously going down. This is an indicator that the lending between banking is easening with a constant rate and without frictions. In December 2008 the rate was almot 1% and now it is less than 0.5%. Also the foreign companies start to issue 5-years issue bonds again (Wal-Mart).
Update on JGB 10-year yield (31.07.2009)
Now the JGB 10-year yield is back on its way above the 1.40% level and there will be more 10-year JGB bonds issued in the next weeks. This could drive the yields further up esp. with the alternative of equity investments. More important is that the life insurance investors which dominate the long-term market tend now to move over to USD/EUR government bonds. All signals are for an upward trend, even with the higher unemployment rate and the deflationary situation in Japan at the moment. It seems that the people in Japan are not that much worried on the unemployment rate. Main reason is that the other Asian countries are rebounding signifcantly as can be seen in property prices in China, Hongkong and Singapore. Looking at the interest rate level before the October burst there would be still some room to go. It was at around 1.80% in the first half of 2008.