I remember how in 2003 the late legendary Barton Biggs, a strategist for Morgan Stanley, proclaimed in one of his Investment Perspectives that 10-year Japanese government bonds (JGBs) were “the short of the century.” Japan had just gone through 10 years of deflation and the 10-year JGB yields had gone from nearly 8% at the time of the all-time high in the Nikkei 225 benchmark index (at near 40,000 in December 1989) to a hair shy of 40 basis points (0.4%) in 2003.

The Japanese government bond market did sell off as deflation seemed to be abating and riskier asset classes like stocks were coming out of the 2000-2002 bear market, but the 10-year JGB yield in Japan never decisively crossed the 2% mark and again sank into deflationary territory to make yet another all-time low in January of this year at 20 basis points…..read full article and larger charts HERE