FXstreet.com (Barcelona) - “We have noted that the JPY weakness should correlate with the steepening at the long end of the yield curve (10 to 30yrs),” FX Trading Strategist at RBS Greg Gibbs notes, adding: “BoJ buying is unlikely to extend beyond 10 years, and while this may squeeze private sector demand further out the curve, if Japanese investors see genuine inflation risks (some of which are likely to relate to risk of a weaker JPY), then they will be reluctant to purchase very long term JGBs,” the analyst suggests.

“Interestingly,” he expands, “the rally in 10 year JGBs yesterday was not followed by 30 year bonds and both long end JGB and swap curve steepened,” he reckons.

“This gives us greater confidence that it is time to build a short position in JPY again,” Greg concludes.