Japanese government bonds are driving the direction of global debt markets more than US Treasury bonds, according to Goldman Sachs Group.


While longer-dated debt yields around the world may be moving higher with Treasury yields, Japanese sovereign securities are actually defining market direction, Goldman’s analysis of bond volatility said.

In an emailed reported, Francesco Garzarelli, Goldman’s co-head of fixed-income strategy, wrote that German bunds may soon determine the path of global bond yields depending on how the European Central Bank extends stimulus,

“U.S. Treasuries continue to exert upward pressures on global bond yields but with a strength that has not been able to match that of Japan,” London-based Garzarelli wrote. “If the ECB can surprise in a reflationary direction, as we are inclined to think it will, longer-dated nominal bonds would be a sell.”

The ECB is scheduled to announce its policy decision on March 10. The average yield of the securities in Bloomberg’s Global Developed Sovereign Bond Index dropped 30 basis points this year to 0.72% Tuesday. It touched a record-low 0.686% last month.

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