Big-name investors are continuing to bet on more interest rate hikes in Japan despite a decrease in market expectations. Vanguard is maintaining its short position in Japanese government bonds, foreseeing the potential for the central bank to implement further rate hikes by December. M&G Investment Management is also adding to its short JGB position and remaining overweight on the yen, while RBC BlueBay Asset Management is selling off Japan’s 10-year sovereign bonds.
These investors’ positions contrast with the current 29% likelihood, according to the overnight swaps market, of the Bank of Japan raising rates by the end of the year. AllianceBernstein has expressed skepticism about further rate hikes unless the yen weakens significantly. However, if the investors betting on rate hikes are correct, this could lead to a strengthening yen and a gradual increase in JGB yields.
Despite market uncertainties, these investors are confident in their positions, potentially capitalizing on a shift in Japan’s monetary policy landscape.
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