Logical Thought
Hedge fund manager, long/short equity, growth at reasonable price, value

Why Shorting Japan's 10-Year Government Bond Is Now A Fantastically Asymmetrical Trade

Although shorting Japanese government bonds while awaiting their crash due to Japan's ever climbing ratio of debt to GDP-- a figure now approaching 245%-- has long been known as "the widowmaker," the bond's current yield relative to inflation is now so out of kilter that one no longer needs a crash in order to potentially book a substantial profit.

The current 10-year JGB yield of approximately 0.6% is now only slightly above its all-time low of 0.425%, and yet the latter was set (in April 2013) at a time of annualized core deflation of 0.4% while Japan is currently experiencing annualized core inflation of 1.3% and the Prime Minister and Bank of Japan have vowed not to stop their...

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