Husain favours so-called flattener trades to express his view — positions that make money should shorter-maturity bond yields rise faster than longer-dated ones. Recent market action and central bank signaling give credence to the bet, with swaps traders pricing a more than 90% chance the BOJ will tighten policy twice by the end of the year.
The Bank of Japan (BOJ) may hike interest rates to 1% eventually, heaping pressure on yields to rise in the world’s second-biggest government bond market, according to T. Rowe Price.
“I’ve had a medium-term belief that they’ll try and get towards 1% if they can,” Arif Husain, chief investment officer of fixed income, said of the BOJ. “They’re somewhat encouraged by wage discussions and that gives them cover to do so.”
