In light of the massive Global Markets Sell-Off overnight, courtesy of Ben Bernanke + Weak Chinese Economic Data + Japanese Stocks Collapsing Back To Reality, I though it’d be wise to stay on topic and focus on the JPY.
Over the past couple of months, the JPY has become the world’s favorite currency carry and hence, I couldn’t help but wonder: What a collapse in JPY means for the bond markets, especially the US 10 Yr, and is the Bond Bubble about to pop?
US 10 Yr and JPY decoupled in November of 2012. I believe that, the JPY is about to crash back to reality and with it, the US 10 Yr.
My target on the US 10 Yr is 3% by Q4 2014. I’m being conservative here, as I believe, QEternity wont be ending anytime soon. What will happen though, is that the FED will start tapering off the size of its Bond Purchases, by Q2 2014. I believe the bond markets will soon start factoring in this possibility, causing the bond yields to start rising in a chaotic fashion.
Will the JPY be the final straw that breaks the camel’s back?
Wall Street Fool
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