The world champions of negative-rate investing are piling into long-term dollar swaps, an indication they see nothing to tempt them in the Japanese market for a very long time. Yen-dollar basis for 30-year contracts plunged to its most negative this year in late May, and has stayed near those levels even after the Federal Reserve flooded markets with liquidity. That’s indicative of how Japanese investors are paying a higher premium to swap their currency for dollars for the long-term. As investors tussle with strategies in a virus-stricken world, where unprecedented liquidity from central banks is driving every market, the Japanese are diving deeper into riskier assets. With the Bank of Japan predicting that negative rates will stay through to 2023, there’s little incentive to hold onto the yen. “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments,” said Eiichiro Miura, general manager of the fixed-income department at Nissay Asset Management Corp. Thirty-year cross-currency basis for yen-dollar dropped to a record low of minus 76 basis points in May, and was at minus 64 basis points on Thursday. That’s a gauge of how flush banks and investors are with yen as they seek to swap it for the greenback. The BOJ said Wednesday it would provide ample liquidity without any limits. Demand for higher-yielding American assets has been growing. In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years, according to the latest Treasury Department data. “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo. “Japan as a capital exporter cheapens yen’s premiums. That is reflected in the difference in cross-currency basis swaps.” https://www.bloomberg.com/news/arti...oney-rushing-into-dollar-assets?sref=8VvBkCcD Don´t believe these fairy tales that the S&P rally is supported by "retail traders". What a crap argument! Retail wouldn´t raise the market even 1% point.... Investors around the globe chasing the same asset with their YEN, EUR, CHF, AUD, NZD, RUB, CNH, CAD....Fasten your seat belts, more to come!
this reads like a whole lot of COPE op. I'd bet on the fed's newly authorized 750 billion bond bailout instead.