The market's downside was somewhat supported after ECB President Mario Draghi suggested overnight that the bank will buy
short-term bonds of financially troubled eurozone countries such as Spain, lifting hopes that further details of the bank's bond-purchasing program will be decided at its policy-setting meeting on Thursday, they said.
The ECB announced in its new plan, a commitment to buy unlimited amounts of
short-term bonds from euro countries that request help.
Recession-stricken Spain's borrowing costs have plunged in recent months owing to the government's deficit-reduction program and a pledge of help from the European Central Bank to buy up unlimited amounts of
short-term bonds in countries.
Investors also sold off
short-term bonds, sending the yield on the one-month Treasury note to 0.31 percent, its highest level since 2008, up from 0.15 percent Monday.
Miyazawa said the BOJ can decide on its own whether to mull conducting so-called twist operations, in which it will sell
short-term bonds to buy long-term ones.
Generally speaking, long-term bond prices are more volatile than
short-term bonds because they are susceptible to the effects of inflation and changes in interest rates over a longer period of time.
He found that Hussman's fund has "underperformed every combination of stocks and
short-term bonds from 100/0 all the way to 0/100" (meaning, in the latter case, a portfolio of exclusively
short-term bonds).
The buffer of highly liquid assets (cash and equivalents, net short-term interbank placements and placements with the Central Bank of Azerbaijan, including
short-term bonds) decreased significantly but remained comfortable, equal to 26% of customer funding at end-1Q19.
Then last Friday, a large fund manager sold
short-term bonds issued by home loan provider Dewan Housing Finance at a sharp discount, raising fears of wider liquidity problems.
Bearing in mind that short-term yields of some highly rated euro area jurisdictions had been gradually decoupling from equivalent overnight index swap (OIS) rates for some time, this implied a sustained demand, particularly for German
short-term bonds, linked to a generally higher need for safe collateral, in an environment in which issuance had been shifting from short-term to long-term bonds.
The Ministry of Land, Infrastructure and Transport has drawn up a bailout plan for the debt-ridden Kansai International Airport Co., giving the semi-public airport operator 9 billion yen in subsidies a year to cover interest payments and providing government guarantees for
short-term bonds to be issued by the company.
The municipal bond yield ratio for
short-term bonds is normally smaller than for long-term bonds; the yield on municipal bonds with a one-year maturity averages only about 70% of the yield on comparable taxable bonds.
