Compared to conventional Japanese Government Bonds (JGBs), JCTBs have exhibited illiquidity, which may make them less attractive to certain investors. The sluggish trading volumes could be due to smaller issuance sizes, the significant holdings by the Bank of Japan, and other factors. These factors contribute to a negative “greenium” in observed market pricing, suggesting that investors are demanding a liquidity premium to hold these instruments.
We propose an array of strategies to broaden the JCTB investor base and promote liquidity. Options include issuing JCTBs in retail and hard currency formats.
