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Yield on 10-Year Japan Government Bond Falls Below Zero

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Yields on Japan’s benchmark 10-year government bond fell below zero for the first time, as investors clamor for safe-haven assets in the wake of a global market rout.

The yield on the 10-year Japan government bond (JGB) dropped as low as negative 0.007 percent. The fall came on the heels of a global stock market sell-off overnight that likely spurred safe haven flows back into Japan. Bond prices move inversely to yields.

The U.S. five-year Treasury yield also fell to around 1.1112 percent in Asia trading hours, its lowest since June 2013, when markets convulsed during the taper tantrum after the U.S. Federal Reserve first broached the idea that it would be tapering its quantitative easing program. The U.S. 10-year Treasury yield fell as low as levels around 1.6947 percent, a more than one-year low.

The 10-year JGB’s move to negative territory yield also follows the Bank of Japan’s (BOJ) move to a negative interest rate policy, which can make the return on JGBs, even at a negative yields, as well as the possibility of further price rises, more attractive comparatively.

Amid a surge in market volatility, “people want to hold government bonds” for the safe-haven play, said Chris Weston, chief market strategist at spreadbettor IG. “It’s not a nice time to be in risk assets at the moment.”

But he added that the rush into JGBs isn’t just about seeking safe havens.

“(Japan policymakers) have been aggressive on the wires, jawboning the currency and giving the impression there’ll be more (easing) coming from the BOJ,” he said. “There’s a large consensus for further action.”

Japan’s Finance Minister Taro Aso said Tuesday that the yen’s moves were “rough,” adding that he’ll be watching it closely, Reuters reported. The dollar was fetching as few as 114.22 yen in Asia trade Tuesday, dropping sharply — and quickly — from levels over 120 yen early last week. The yen is seeing inflows as it’s considered a safe-haven currency.

A stronger yen is a concern for Japan Inc., as it makes the country’s exports less competitive and dents company earnings when overseas revenue is translated back into the home currency.

The 10-year JGB’s move into negative yields had been expected ever since the BOJ adopted the negative rate policy.

Deutsche Bank last week forecast 10-year JGB to trade in a range of negative 0.05 to positive 0.15 percent for the time being. Capital Economics tips the bond yield to fall to negative 0.25 percent by the end of 2016.

Yields on shorter-dated bonds were already negative in Japan, as well as in many countries in the euro zone, where the European Central Bank has flooded financial markets with cash. Nearly 70 percent of the JGBs in the market already offer negative yields, the Nikkei Asian Review reported last week.

However, a yield below zero on 10-year bonds is rare. Switzerland 10-year bonds currently yield around negative 0.335 percent, although the country’s bond market is smaller than Japan’s.

A negative yield on a bond – which means investors are effectively paying for the privilege of lending Japan’s government money – suggests continued strong demand for JGBs.

The latest driver for the rally in bond prices (and the decline in yields) was the January 29 move by the BOJ to adopt negative interest rates for the first time. The central bank said it would apply a rate of negative 0.1 percent to excess reserves that financial institutional held with it, effective February 16.

That nontraditional policy change may also be unsettling markets.

“I think that central banks are re-writing the Econ textbook. The problem is its unclear how this story ends, but history would suggest this is not a sustainable trend,” said hedge fund manager Brian Kelly of BKCM LLC.

—By CNBC.Com’s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Africa Day 2022: Energy Key to Ending African Food Crisis – ECP

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Energy Capital & Power (ECP) says enhancing investment and development of the African energy sector will help drive the development of the continent.  

ECP said this on Wednesday while marking the 2022 Africa Day tagged: The Year of Nutrition. It said “Energy is the backbone of every economy. Energy is a fundamental enabler and key driver of Africa’s development. 

“Access to reliable, affordable, and sustainable energy goes beyond simply keeping the lights on, however, but drives industrialisation, agriculture, and infrastructure expansion while improving access to medical, education, and food services,” ECP added. 

Africa’s leading investment platform for the energy sector stated that it remains fully focused on enhancing investment and development across the African energy sector, making a strong case for energy as a key driver of food resilience and climate change mitigation.

According to its official report made available to Investors King, ECP revealed that “Africa is facing a mounting food crisis which has only been worsened by the COVID-19 pandemic. 

“Climate change, political and economic crises, and regional conflict and displacement have resulted in over 346 million people suffering from severe food insecurity while 452 million suffer from moderate food insecurity. 

“While this insecurity continues to have significant consequences on the physical, mental and physiological development of the population, the burden of malnutrition transcends into the socioeconomic space, with the Cost of Hunger in Africa Study estimating that African countries are losing the equivalent of between 1.9 and 16.5 per cent of their gross domestic profit due to child under-nutrition. Accordingly, this year’s Africa Day is being celebrated under the theme, ‘Strengthening Resilience in Nutrition and Food Security on the African Continent,’ centered around the need to strengthen agro-food systems and health and social protection systems for the acceleration of human, social and economic capital development,” the statement added. 

ECP said it believes that ongoing efforts to achieve net zero hunger can be strengthened through the expansion and improvement of energy systems across Africa. Currently, 65 per cent of Africa’s population relies on subsistence farming, and in order to tackle food insecurity, governments across the continent are looking at deploying large-scale modern agricultural systems, systems which require significant energy at every stage of the production stage.

“By scaling up investment in key energy industries, Africa has the opportunity to address two imminent crises: energy and food insecurity. The correlation between improved energy and food security is evident: by strengthening energy access and affordability, countries can strengthen agro-food systems continent wide, tackling food security and driving socioeconomic growth,” said Laila Bastati, Managing Director, ECP.

The African Development Bank Group’s Board of Directors had on Monday approved a $1.5bn Emergency Food Production Facility to help tackle the global food crisis sparked by the Russian-Ukraine conflict. 

Africa’s only AAA-rated financial institution added that the funds will help 20 million African farmers produce an extra 38 million metric tons of food to address growing fears of starvation and food insecurity on the continent.

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Refining Sector Accounts For 3% of Global Emission – ARDA

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The African Refiners and Distributors Association (ARDA) has revealed that the refining sector only accounts for 3% of the global energy sector emission. 

Oil and Refining Research Analyst, Maryro Mendez, stated this at the second Refining and Specifications Virtual Workshop organised by the ARDA and monitored by Investors King.

According to Mendez, “the refining sector accounts for only three percent of the global energy sector emissions. While refineries’ contribution to global energy sector emissions is low, the opportunities for reducing them are significant.

“Refineries globally have started thinking about measuring, monitoring and reducing carbon emissions and environmental sustainability has to be a priority for refiners and Africa is no exception.”

According to her, because fuel combustion accounts for 80% of refinery carbon emissions, fuel source and energy optimization would provide the greatest chance to minimize emissions.

“The challenge is not technical but is commercial with facilities requiring sufficient incentive and capital to invest without impacting on their competitive position”, she added.

The association further revealed that Nigeria and other African countries would need to minimize sulphur levels while noting that upgrading their existing refineries would require at least $15.7 billion.

Anibor Kragha, ARDA’s Executive Secretary stated that adopting a standardized specification will prevent the importation of fuels that do not match AFRI specifications into Africa.

“New process units required are to improve key fuel specifications, especially Naptha Hydrotreater (NHdT), Diesel Hydro-desulph. (DHDS), Benzene Extraction, Sulphur, and Hydrogen Plants.

“Another key focus area is for African countries, especially those sharing common fuel supply chains to develop an integrated policy covering both fuel quality and vehicle exhaust emissions.

“This is to achieve the ultimate objective of clean air in our African cities. Without this integrated and coordinated policy, the objective of clean air will not be realized whether by imports or local production,” he said.

The idea for an African refinery association was conceived in the late 1970s, and the first sub-Saharan African initiative – the Association of Refiners and Distributors of Oil Products (ARDIP) – was launched in September 1980, led by the SIR refinery in Cote D’Ivoire, with counterpart refineries in Senegal, Sierra Leone, Liberia, Ghana, and Gabon.

Mr Joel Dervain, the then Managing Director of SIR, re-activated the campaign for an association to promote technical and commercial best practices among African refiners and their stakeholders in 2006. The African Refiners Association (ARDA) was then created on March 23, 2006 in Cape Town, South Africa, with the help of his colleagues at SONARA, SAR, TOR, SOGARA, and NATREF.

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African Energy Chamber to Host Energy Transition Forum at The 2022 Energy Week  

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African Energy Chamber (AEC) says it will host the Energy Transition Forum, in partnership with public and private sector organisations, government representatives, energy stakeholders and investors in October. 

In a statement made available to Investors King AEC stated that “The Energy Transition Forum will address critical issues such as the lack of adequate funding, the diversification of the energy mix, workforce development, and regulatory reforms necessary to enable Africa to expand its energy sector to address energy security, affordability, access, and sustainability matters”.

“With some 600 million people across the continent living in energy poverty and over 900 million without access to clean cooking, Africa needs to exploit all of its vast natural resources in order to make energy poverty history by 2030. In this respect, stakeholders across the continent are opting for an integrated approach to developing energy resources whereby every resource is utilized in order to kickstart economic growth and electrification. With over 125.3 billion barrels of crude oil, 620 trillion cubic feet of gas, and nearly 16.4 billion short tons of coal, the continent is well-positioned to drive economic growth,” it added. 

Executive Chairman of the AEC, NJ Ayuk, said: “With nearly 66 per cent of the world’s population living without electricity access based in Africa, the continent needs to ramp up the production of all its energy resources including gas, oil, wind and solar to ensure energy poverty is history by 2030. The AEC is honored to host the Energy Transition Forum at AEW 2022 where an African narrative of a just and inclusive energy transition that is fit for Africa will be developed. We will go from Cape to Cairo with a well-defined African message. Africans and the energy sector have a rare chance to define the narrative and we must.” 

The Energy Transition Forum is bringing together investors, regulatory authorities and energy market players to discuss the role of gas in Africa’s energy future and energy transition. The challenges of limited investments in gas exploration, production, and infrastructure development in gas-rich countries such as Nigeria, Algeria, Egypt, Niger, and Mozambique will also be addressed.

According to the AEC, climate change continues to impact Africa, leading to an increasing number of African countries such as Nigeria, Namibia, Morocco, South Africa, Uganda, and Kenya introducing policy reforms and initiatives to scale up renewable energy penetration in Africa. 

Investors King gathered that Nigeria has vowed to achieve climate neutrality by 2060 by increasing the share of natural gas and renewables in its energy mix while Namibia aims to make the development of hydrogen central to its energy policy. At the same time, South Africa has introduced its Hydrogen Society Roadmap to fast-forward the development of local content and hydrogen infrastructure whilst Morocco’s Law 13-09 and Egypt’s net metering scheme aims to expand distributed renewables development.

The chamber added that the AEW 2022, under the theme – “Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment” will feature high-level meetings and panel discussions where government ministers, investors, academia, and energy market stakeholders will discuss how Africa can attract funding to boost exploration, production and infrastructure development to ensure secure supply while remaining a climate champion. 

The African Energy Week is scheduled to take place from 18th – 21st October 2022 in South Africa at Africa’s premier event for the oil and gas sector.

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