UBS on the yen – Says speculative short yen positioning “no longer extreme”

A client note from UBS in the wake of the BOJ yesterday:

• BoJ risks still appear under-priced and speculative short yen positioning is no longer extreme
• Continuing the yield hunt BoJ inaction and Federal Reserve caution should not obscure one Japan risk that is playing out now – greater Japanese portfolio diversification into foreign securitie
• 10yr JGB yields below 60bp & volatility remaining suppressed, one should expect Japanese investors to become increasingly engaged in the global hunt for yield
• They cite:
• apanese investors have been net foreign bond buyers in 8 of the past 11 week
• Longer-term investors leading the diversification process into markets ranging from the US to France, Australia and Mexico
• The GPIF’s impending portfolio changes, which could benefit USTs in particular

UBS like short yen positions.