|
PureBytes Links
Trading Reference Links
|
How does Japan keep their bond yields at such low levels.
High for last 12 months 2.2 %
Low for last 12 mon. 0.8 %
Oct 14 is 1.7 %
Wouldnt the assumption be that Japanese investors will shun their markets for
US bonds with higher yields.
As an example......
a Japanese investor (Yen 500,000) buys US bonds , holds them for 6 months ,
collects interest & converts currency back to Yen
on 2/1/1999
Yen 500,000 / 115.06 (exc.rate) = US $ 4,386
$ 4,386 x 4.8% (US 10 year note interest) = $104 (interest for 6 months)
$ 104 + $ 4,346 = $ 4,450 (Interest + principal)
On 7/31/99 convert $ to Yen
$4,450 x 114.63 (exc. rate) = Yen 510,087
gain = Yen 10,087
Had that investor invested in Japanese bonds
Yen 500,000 x 1.8 % (japanese 10 year int) = Yen 504,500 (int. + prin for 6
months)
Profit by investing in US Bonds = Yen 5,587
Taxes etc. are ignored.
Am I missing something , or is this being done in real life.
Any opinions.
Frank
|