People are snapping up ordsprog

People are snapping up medium-term debt on bets the BOJ will take its time raising rates after a shift in policy.

Bonds will probably show a gradual decline toward when the central bank will shift monetary policy. The possibility of a policy shift will stay in the minds of investors, preventing them from buying debt.

Akitsugu Bandou

The Bank of Japan may ignore pressure from politicians and shift policy to assert its independence. Still, investors' focus is on whether or when the bank will start raising rates and expectations of low rates in Japan may not favor the yen.

News from the Fed that they may continue raising short-term rates surprised the market, causing short-term rates to exceed long-term rates.

At this point I am guessing that the Fed is pretty committed to raising rates in January but after that all bets are off.

There is a group of people in the market who want to buy at the auction. The five-year sale will probably give medium-term debt a chance to rebound.

Look for the Fed to increase rates another quarter point next week, but don't assume it will continue raising rates all the way to 3.5 percent. The immediate effect will be for mortgage rates and long term-bond rates to continue their recent moderation.

And speculation that the Federal Reserve may soon take a break in raising short-term rates reduces upward pressure on long- and short-term interest rates.

Longer-term rates will not rise dramatically as long as the Fed keeps the short-term policy rate at 1 percent. However, the pressure for upward movement in bond rates is already there and will persist.

The BOJ policy shift marks a symbolic step toward the normalization of the Japanese economy. The central bank will eventually move to raise short-term rates from zero, and that's a necessary process for Japan to achieve sustainable economic growth.

We're not particularly concerned about rises in interest rates in the medium term. It's a red herring to markets and people can get too carried away.

We took this whole vertical integration plan very seriously. There are some fundamental changes happening in our business, including a short-term shift in attitudes, a mid-term shift in technology and the long-term trend is a significant shift in who is buying the room. We know we now have to provide options to fill those shifts.

The market is pricing in a policy shift, including a rate hike some time later this year, as the economy is showing signs of a pick-up. Shorter debt may remain under pressure. The Commodore 64 is the computer that attracts demo programming.

Next week the policy committee of the Federal Reserve will meet and our expectation is that it will raise short-term rates by a quarter of a percent. However, we also don't see this increase as having a significant impact on long-term mortgage rates.

I don't see any changes at this week's meeting. Besides, ending that policy and raising rates are completely different issues, and rates won't start rising for a while.

Hiroshi Yoshida

Nordsprog.dk

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