For the first time ever, 3 year Japanese government bond (JGB) yields are trading below 1 year JGB yields as the world's inexorable desire to repatriate, delever, and seek safety while reaching for as much term yield as is still 'safe' come home to roost. With Swiss rates already grossly negative and German rates rapidly converging, the world's (d)evolution (since evolution conjures a rebirth into something better) is shifting investors out the yield curve as ZIRP is here to stay forever, wherever you look in so-called developed economies (who can print their own money). In the last 4-5 weeks, 3Y Japanese bond yields have dropped 6bps to around 10bps (pretty much the same as every other maturity inside of 3Y) as the entire yield curve gradually flattens pushing out investor's perception of 'cash' to longer- and longer-maturities. The inversion (i.e. 3 year rates below 1 year) is also interesting given its maturity coincides with the maturity of Europe's LTROs as perhaps some round-about funding mechanism to avoid EUR-USD basis swap detection is forcing money into the Japanese bond market. Of course the lower and lower rates are forced by this unintended consequence of Central Bank signaling, the further out investors will creep, accepting more and more duration, which given its generally monetized by the Central Bank ensures rates cannot rise since the jump in the cost of funds would destroy Japan's QE-driven economy. Be careful what you wish for US equity investors, as the Keynesian Endpoint is upon us (and perhaps, just perhaps that is why Central Banks of the world are checking to the Fed, the ECB is playing hardball, and the Fed remains on hold unless apocalypse occurs - which by the way is not an 8% retracement of a 30% straight line rally).
3Y JGBs trade below 1Y JGBs - leaving the short-end inverted...
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and the whole curve has flattened significantly in the last few weeks...
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but this is not unusual for the front-end of the German Bund curve in recent years as rotation from the USD (in 2008/9) and from periphery to core (Q3 2011 and now) drove the curve inverted as investors crept out a long a short-end that offered some yield and term safety...
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and interestingly this is occurring as EUR-USD basis swaps (short-term USD funding at a premium for European entities) jerks to crisis levels again...
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Charts: Bloomberg