TOKYO: Japanese government bond (JGB) yields declined on Wednesday, as investors scooped up safer assets amid fears of a wider conflict in the Middle East after Iran’s ballistic missile strike on Israel. The 10-year JGB yield fell 3 basis points (bps) to 0.82%, leading declines across the curve.
Iran launched ballistic missiles on Israel on Tuesday, prompting vows from Israeli Prime Minister Benjamin Netanyahu that its arch foe would pay for the attack.
Tehran said any retaliation would be met with “vast destruction”, raising fears of a wider war.
“A risk-off mood has spread, which is supporting the bond market,” said Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
US Treasury yields, which move inversely to bond prices, fell on Tuesday, while investors sold off US stocks and other riskier assets.
Japanese stocks dropped 2% on Wednesday as market players digested the news.
JGB yields have declined since Tuesday, when a summary of opinions from the Bank of Japan’s (BOJ) September meeting showed policymakers discussed the need to go slow in raising rates.
But the case for a rate hike has not been completely ruled out, putting the focus on when the BOJ will signal readiness for further increases, said Mitsubishi UFJ Morgan Stanley’s Tsuruta. Given the BOJ’s focus on whether the US economy can avoid a hard landing, the US jobs report due on Friday will be “crucial”, he said.
Japan’s 2 year bond yield hits 13-year high as BOJ chief hints chance of another rate hike
BOJ Governor Kazuo Ueda said on Wednesday the central bank must be vigilant to fallout from unstable markets and global economic uncertainties in guiding its monetary policy.
The 20-year JGB yield slid 2.5 bps to 1.64%, while the 30-year JGB yield ticked down 0.5 bp to 2.065%.
The two-year JGB yield declined 2.5 bps to 0.36%.
The five-year yield was down 2 bps at 0.475%. Benchmark 10-year JGB futures rose 0.35 point to 145.05 yen.
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