TOKYO: Japanese government bond (JGB)yields rose on Friday, as a weak yen raised bets for a Bank of Japan rate hike, while a hawkish turn by the U.S. Federal Reserve chief hurt sentiment.
The 10-year JGB yield touched 1.08%, its highest level since July 25, and was last up 1.5 basis points (bps) at 1.075%.
The five-year yield rose 1.5 bps to 0.705%, hovering near its highest level since November 2009, despite firm demand at an auction for bonds of the same maturity.
“Market sentiment was weak, as the weaker yen boosted bets for a BOJ rate hike, while (Fed Chair Jerome) Powell’s comments also weighed,” said Miki Den, senior Japan rate strategist at SMBC Nikko Securities.
Overnight Index Swap (OIS) rates indicated a 54.45% chance of the BOJ raising rates to 0.5% in December.
U.S. Treasury yields across most maturities rose overnight after Powell said the central bank does not need to rush cutting interest rates amid a stable labour market and stickier inflation.
JGB yields track US peers to fresh peaks as market ponders BOJ rate hike
The higher yields pressured the yen. The Japanese currency was last down 0.05% at 156.335 per dollar, nearing a territory that had triggered intervention from Japanese authorities in the past.
The yen has fallen some 11% since its September peak and weakened past the 156 per dollar level for the first time since July in the previous session.
Japan’s two-year JGB yield, most sensitive to a BOJ policy shift, rose 2.5 bps to 0.555%, hovering near its highest since December 2008.
The 20-year JGB yield rose 0.5 bp to 1.895%.
The 30-year JGB yield was flat at 2.3%.
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