A few important things of note
The Bank of Japan is not only in a rate hiking cycle, however glacial, and reducing their QE purchases, they are about to embark on selling its massive holdings of ETFs on Monday of which they own 83 trillion yen of at current market levels (about $500 billion). It will take though 251 years to fully liquidate at the pace they are doing so, 330 billion yen per year. Fortunately for the BoJ, their cost basis is about 37 trillion yen but I hope lessons are learned that the huge intrusion into the markets in order to generate higher inflation that many are so upset about should not be repeated.
The 10 yr JGB yield by the way is up another 2.7 bps to 2.19%, a fresh 27 year high. The big question for global flows is at what level of yield do the Japanese decide to bring their large amount of overseas money home, especially from the US Treasury market. I don’t know the answer and it’s likely higher than where we are now but we’re quickly heading to that decision time.
Japan did further add to its US Treasury holdings in November by $2.6b according to last night’s fresh TIC data to $1.2t, the most since 2022. China though continued to sell their holdings, by $6.1b and taking their holdings to $683b, the least since 2008.
Another day of verbal intervention threats also has the yen higher for the 2nd day in three. All something to watch this year I continue to believe.
