Intriguing RV graphs: Lessons from Europe on what follows behind-the-curve concerns
Key points
We examine path of super-long JGB market after concerns about BoJ falling behind the curve recedes, based on case studies of Germany and Italy
Lessons are that super-long government bond yields (1) may decline if behind-the-curve concerns ease, but (2) may rise if asset swap spreads widen due to fiscal concerns
(3) Even if both concerns subside, yields are unlikely to enter downtrend as long as terminal rate uncertainties persist