JPMorgan Chase, after incorporating global and local central bank hawkish/dovish indices, inflation forecast revision indices, and future inflation forecasts into its valuation model, found that the yields on 10-year government bonds in most developed markets were higher than the model's implied levels. Positive residuals indicate high yields and low bond valuations, with the US at 51.9bp, the Eurozone at 22.0bp, the UK at 23.1bp, Australia at 26.4bp, and Japan reaching 126.5bp.
The most extreme valuations were in Japan and New Zealand: Japan's 10-year government bond model residual was positive at 126.5bp with a Z-score of 4.36; New Zealand's was negative at 76.2bp with a Z-score of -1.74. However, JPMorgan Chase cautioned that Japan's extreme results may reflect a shift in yield regimes, which historical models may not fully capture.
