TOKYO: Japanese government bond (JGB) yields broadly fell on Monday as violence escalated in the Middle East, boosting demand for safe-haven assets. However, an auction for the 20-year bond on Tuesday had investors treading carefully in the superlong end of the yield curve.
The 10-year JGB yield fell 1.5 basis point (bps) to 0.745%, tumbling further from Friday’s session high of 0.775%, with investors seeking security as the Israel-Hamas war continues to intensify.
The move in Japanese yields, reflecting the rise in prices as investors sought safe-havens, mirrored their US Treasury peers, which fell on Friday and picked up only slightly in the Asian day.
In addition to concerns over the conflict, investors are looking ahead to Japan’s consumer price index data on Friday, making it difficult for yields to rise, said Hiroshi Namioka, chief strategist at T&D Asset Management.
The inflation report will be published a little over a week before the Bank of Japan (BOJ)’s next monetary policy decision at the end of the month.
The BOJ is expected to make an upward revision to their outlook for inflation at the October meeting, potentially signalling that the central bank is moving closer to an exit from its ultra-easy monetary policy.
The two-year JGB yield and five-year yield both ticked down 0.5 bps to 0.035% and 0.31%, respectively.
JGB yields rise as traders gauge BOJ, US Fed policy paths
Meanwhile, the 30-year JGB yield held flat, while the 20-year yield inched up 0.5 bps to 1.525% ahead of Tuesday’s auction.
There was a sense of trepidation heading into the event after recent auctions for superlong bonds have seen weak demand, said Namioka. Last week’s 30-year bond auction had the lowest demand since 2019, and an auction for the 20-year JGB in August was the weakest in decades.
With that August auction in the backdrop, “it’s easy to feel cautious,” Namioka said.
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