After last month’s sudden upward jolt, the S&P/JPX JGB VIX kicked off August at intramonth high levels.
The S&P/JPX JGB VIX began the month at an all-time historical low (1.11) and remained near that levelfor three weeks. Then late in the day on July 20, 2018, there were several news reports that the Bank of Japan (BoJ) would be debating policy changes at their upcoming Monetary Policy Meeting (July 30-31, 2018). As measured by the S&P/JPX JGB VIX, this sent shockwaves through the markets in the trading sessions to follow and, as a result, the BoJ performed defensive operations to keep yields from skyrocketing ahead of the meeting.
S&P/JPX JGB VIX continued to break new ground to the downside in June and finished the month at all-time low levels (6/29 close 1.13), a leading indicator that the Bank of Japan’s (BoJ) quest to stamp out volatility has so far been successful.
The S&P/JPX JGB VIX began the month in a relatively tight range, as the underlying JGB market followed other global bond markets.
Despite the general downtrend, the S&P/JPX JGB VIX got a strong intra-month boost, as 10-Year U.S. Treasury Bond yields approached the symbolic 3% level and global inflationary pressures caused JGBs to weaken.
S&P/JPX JGB VIX started the month off with a jolt from Bank of Japan (BoJ) Governor Haruhiko Kuroda’s comments regarding a possible exit from current monetary policy in fiscal year 2019.
S&P/JPX JGB VIX kicked off the month with a muted tone as the Bank of Japan (BoJ) performed an unlimited fixed rate buying operation on February 2nd to reverse the trend of rising longer-dated yields.
S&P/JPX JGB VIX jumped higher intra-month on the back of a surprise reduction by the Bank of Japan (BoJ) to their regular long-dated JGB buying operations.
S&P/JPX JGB VIX came off intra-month lows of 1.38 to jump almost 20% over 3 trading sessions as 10-year JGB futures plummeted ahead of the Bank of Japan’s regularly scheduled monetary policy announcement on December 21st.
S&P/JPX JGB VIX started November off at near-term lows (November 2nd close 1.30) to rise over 30% over the course of the month. Lows coincided with Prime Minister Shinzo Abe’s re-election in parliament and reappointment of his cabinet after his ruling coalition’s strong electoral win last month.
S&P/JPX JGB VIX came off the highs of the month (October 3rd close 2.03) to finish at 1.40 as uncertainty around a possible change in Japan’s overall political landscape and near-term lower house election results were resolved.
S&P/JPX JGB VIX remained elevated over the course of the month as geopolitical tensions in the region combined with local political uncertainty. S&P/JPX JGB VIX touched intra-month highs of 2.06 (levels not seen since April) ahead of North Korea’s anniversary weekend.
The S&P/JPX JGB VIX saw a rise of >27% over the course of the month (1.41 to 1.80) on the back of regional geopolitical tensions and general global “risk-off” moves.
This is the second installment of a two-part empirical paper exploring the interaction between Japanese yen exchange rates and forward-looking Japanese Government Bond (JGB) volatility as measured by the S&P/JPX JGB VIX.