JPY: Preferred funding currency in an “orderly” bond bear market - ING

The JPY underperformed on the crosses yesterday following Draghi’s remarks and analysts at ING has a view that the BoJ will be the last of the DM central banks to normalise policies and will thus see most bond yield spreads widen against Japan.

Key quotes

“We also note that Japanese buying of foreign debt has got off to a slow start this year, but typically accelerates over the summer. Based on our house view that the rise in bond yields will be “orderly” (eg, led by controlled central bank normalisation, rather than by surging inflation) – risk assets should remain supported and the JPY should stay soft. We have a very bullish profile for EUR/JPY over the next 12 months (142 target) and also see value in EMEA high yield (eg, TRY) funded out of JPY.”