I have huge love and admiration for JGBs, and by extension, the JGB investors. Basically, I never argue with JGBs. If they say inflation, I think inflation. If they say deflation, then I think deflation. I made a lot of money in Irish bonds during the Eurocrisis, but I am very proud of my purchase of 30 Year JGBS in 2015 at 1.5%, and then selling them at 0.10% a few months later.
When 30 Year JGBs did not touch new lows in the Covid sell off, I knew we were in a new world. And from there yields have surged. I always wondered what the JGB market saw. My best guess was they foresaw the huge increase in US government spending under Biden.
I also suspected they foresaw the huge budget deficits and tariffs of the Trump administration. All things I bunched under the “pro-labour” trade.
All this led to the GLD/TLT trade, which has been great, with limited volatility, until this year.
But this year, GLD/TLT has been correlated to the AI trade. Could JGBs have picked up the AI trade that early? And are they predicting the end? So time for some research.
