Market Basics: Long Rates To Rise, Then Dip In 1st Quarter
Wednesday, November 24, 1999
TOKYO (Nikkei)--Long-term interest rates will come under upward pressure for the rest of 1999 as the market begins to digest a stream of negative factors, predicts Daisuke Uno of Sumitomo Bank.
The readings on the Bank of Japan's tankan, its quarterly economic sentiment survey, will likely be better than those on the previous analysis. The survey, slated for release on Dec. 13, will show that positive effects from rising stock prices have readily offset the negative factors stemming from the yen's appreciation, Uno explains.
Furthermore, he says, participants in the fixed-income market will have a better picture of the government bond issuance calendar for the next fiscal year by late December. The yield on new 10-year government bonds will hover between 1.8% and 2.0% for the remainder of the year, he forecasts.
However, long rates will slide in the January-March quarter because public works projects, which had given support to the economy, will lose momentum while consumer spending is not likely to show signs of life, he contends.
Long rates will then begin to rebound, heading eventually to 2.3%, when capital investment gathers momentum in the middle of the next fiscal year and the economy rides onto a self-sustained recovery path, he says.
(The Nikkei Financial Daily Wednesday edition)
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