Intriguing RV graphs: Impact of prolonged Middle East conflict on JGBs, ASW
Key points
Unlike European bond markets, JGB market largely failing to price in potential fiscal expansion pressures stemming from escalating tensions in Middle East
In Eurozone, the higher a country’s government debt-to-GDP ratio, the wider the ASW spread; perhaps out of concern that interest payments will increase as yields rise
Japan not immune to potential fiscal expansion pressures; protracted Middle East conflict applying increased pressure on super-long ASW spreads