Japanese money moving home could impact global risk assets: ICICI Pru AMC’s Manish Banthia
First, global yields aren’t destined to keep rising. In fact, they look more likely to fall. A lot of the ‘damage’ is already in the price. Japan’s 10-year has moved from -40bps to around 3%, its 30-year has moved from around 50bps to around 4%, while inflation is still under 2%, making real yields unusually high. The US 10-year sits near 4.8%, the 30-year near 5.3%, close to 15-20 year highs, even as core inflation is flattening around 2.5%. Real yields on bonds are historically rich, while equities (S&P 500, Kospi, Nikkei) look expensive after a long bonds-to-equities rotation. That asymmetry of cheap bonds and expensive equities makes further sharp yield increases less likely than a reversal, whether triggered by a risk-off unwind in equities or a slowing US cycle.
