With yields still at very low levels and some critics wondering about the future sustainability of bond purchases, an attractively skewed trade could include a short position in JGBs along with a short position in the Japanese yen.

1Source: Bloomberg, as of 3/20/15.
2Source: Bloomberg, 2/3/15.

Important Risks Related to this Article

Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. In addition, when interest rates fall, income may decline. Fixed income investments are also subject to credit risk, the risk that the issuer of a bond will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline.

Investments focused in Europe or Japan are increasing the impact of events and developments associated with those regions, which can adversely affect performance.