Following the example of Societe Generale, Deutsche Bank has withdrawn from trading Japanese government bonds.

Deutsche Bank strategists recommend exiting a flat trading position on Japanese government bonds established one month ago with a maturity of 2/30 years. The bank points out that the yield curve has flattened by about 25 basis points. Although the original target of 100 basis points is still far away, the current valuation has made the cost-benefit ratio of continuing to hold the position lower. The Japanese government recently nominated two dovish members to the Bank of Japan, which has raised concerns in the market about the tolerance of the Japanese decision-making authority for further depreciation of the yen, increasing policy uncertainty. The strategist noted that expectations of higher future unemployment rates due to AI challenges their original bearish view on core interest rates. In order to hedge the risk of AI impacting the job market, Deutsche Bank extended its long position in euro short-term interest rates originally maturing in June 2026 to December 2026. Meanwhile, French bank Societe Generale initiated a tactical steepening trade of 5/30 years and mentioned that the flattening of the yield curve post-elections has "gone too far."