TOKYO: A handful of big-name investors are still betting on more interest rate hikes in Japan in the coming months.
They’re sticking to their guns despite a sharp cut in market pricing on the likelihood of more tightening following the latest sell-off.
Vanguard, the world’s No. 2 asset manager, has doubled down on its short position in Japanese government bonds (JGB) as it still sees the possibility that the central bank can deliver an additional 50 basis points of rate hikes by December.
The prospect of another hike has also prompted M&G Investment Management to keep adding to its short JGB position, while staying overweight on the yen.
RBC BlueBay Asset Management continued to dump Japan’s 10-year sovereign bonds.
These positions are at odds with the overnight swaps market, which is pricing about a 34% possibility that the Bank of Japan (BoJ) will raise rates from 0.25% by the end of the year, down from about 63% at the start of the month.
They are also in contrast to the likes of AllianceBernstein, which has said the BoJ will find it difficult to raise rates further in 2024 unless the yen slumps back past 160 to the US dollar. — Bloomberg
