The beauty of the world’s governments are they can do whatever they want and the people of the country go along with or support. The rest of the world will examine what the government does or does not do and make decisions or global capital will flow. Sometimes it is towards countries, and sometimes it is away from it.

In an article by Rocky Swift and Harry Robertson of Reuters, the country of Japan is raising its interest rates to 3% which is bringing global capital to it, because for the decade or so, Japan has been the poster boy for 0% interest rates. The 0% interest rate led to global flow outside the country and is the reason why Japan hold $2.4 trillion in US Treasuries. Japan is the biggest holder of US Treasuries.

However, bond traders in Sydney, London and Singapore have noticed the Japan’s the pullback of Japan’s demand. Japanese investors have sold $18.7 billion in overseas debt through August 22.

In Sydney, Australia, the Japanese investors were once the largest foreign holder of debt, now they are not accumulating as much and more holding their exposures reasonably consistent, said Ryan Ellis, Citi’s head of market sales for Australia and New Zealand.

In a survey of 82 corporate Japanese pension funds by JP Morgan Asset Management showed the net share planning to boost domestic holdings was the highest since the poll began in 2008. The funds continued to reduce their holdings of overseas debt amid high currency costs.

As JGB yields rise, the relative attractiveness of domestic bonds improves on a currency-hedged basis, potentially encouraging a shift back to Japanese fixed income, notes Masayuki Nakajima, senior strategist at Mizuho Bank in London.

The JGB yield hit 3% for the first time in 1996, having more than tripled over the past 2 years.

Linking to dividend paying stocks, there is always a comparison or alternative and those alternatives also move so they become less attractive. In the above case the magic number was 3%, above 3% yield Japanese money stays home, below it flow to another country. For you what is your magic number yield to buy more bonds?

There are more questions than answers, till the next time – to raising questions.