As the sharp rise in US long-term Treasury yields begins to settle, the Japanese equity market may shift toward a pattern resembling the year-end 2023 Fed pivot rally. A bank-affiliated report says that market risks will change depending on the direction of long-term interest rates.
According to Investing.com, the Japanese equity market may begin to move in a way similar to year-end 2023 as the rise in US long-term Treasury yields settles. BofA's Japan Equity Strategy Report warns that stronger fundamentals will be needed for a sustained rally.
The report notes that investors' concerns about rising long-term yields may ease following the US Treasury's decision to raise the cap on long-term Treasury buybacks.
Specifically, the Treasury is reportedly planning to target 10- to 20-year and 20- to 30-year Treasuries for repurchase, while raising the per-operation cap from $2 billion to at least $4 billion.
Further updates will be needed to determine how this move will affect the broader market in practice.