Citigroup Inc. (C, Financial) is optimistic about the resurgence of Japan's bond market, anticipating that the end of negative interest rates by the central bank will rejuvenate the sector, attract professionals, and bolster the bank's efforts to expand its debt operations.
Following the Bank of Japan's decision to terminate its negative-rate policy and relax its control over bond yields, there's been a noticeable uptick in the Japanese government bond market, valued at $7.3 trillion. This change has sparked a competitive environment among banks to attract top traders, offering them substantial bonuses, a stark contrast to the stagnant market conditions that prevailed for years.
Kazuhiro Nakajima, a senior executive at Citigroup's local securities division, highlighted the increasing influx of young talent into the rate sales team, a trend that was challenging in the past due to the market's lack of movement. With the central bank's recent policy shift, the bond market is poised for greater volatility, a welcome development for trading activities.
Citigroup has managed to retain a skilled team with experience from previous rate hikes in 2006-07, positioning its rates business competitively. The bank has also successfully expanded its yen rates business among Japanese regional lenders, experiencing growth that surpassed expectations. This expansion involves transactions in Japanese government bonds and yen rates swaps.
The revival of Japan's stock market has also brightened prospects for the equities business, drawing global attention to Japanese companies. Nakajima, who also oversees equity markets, noted an increase in inquiries from analysts, driven by governance reforms in Japanese firms and shifting global investment trends.
This resurgence in Japan's financial market comes at an opportune time, aligning with Citigroup's strategic goals and highlighting the potential for significant activity ahead in both bond and equity markets.
