< The 2014 All-Japan Research Team
Appearing on this roster for the first time, Jun Ishii of Mitsubishi UFJ Morgan Stanley Securities Co. captures second place, earning praise for “his wide range of views,” in the words of one admirer. Over the next two years, Ishii says, the yield for the ten-year Japanese government bond will remain “at unprecedentedly low levels.” At 0.63 percent in mid-March, the security will continue to trade sideways within a core range of 0.6 to 0.8 percent, he believes, because the Bank of Japan’s monetary policy of quantitative and qualitative easing has helped produce a demand-driven market. Any surprises, either positive or negative, will “have only a temporary impact, with the ten-year yield eventually returning to this range,” the strategist predicts. Further, generating sufficient income from this asset class will be increasingly difficult as bonds are redeemed in quantity and spreads contract, he explains, so “hitting targets could require investors to increase the average durations of their bond portfolios as far as their tolerance for risk allows.” If that approach proves to be too difficult, a dumbbell strategy could be the solution, he suggests. “Investors will need to keep a close eye out for the possibility of a sharp bear steepening of the curve or a malignant rise in yields triggered by fiscal problems,” Ishii concludes. |