TOKYO: Japanese government bond yields eased on Monday as traders braced for potential volatility ahead of Donald Trump’s swearing in as US president later in the global day.
Markets could be shaken not just by Trump’s inauguration speech, which will come just as Japanese markets get going on Tuesday, but also some 100 executive orders that the incoming commander-in-chief said he will implement on his first day.
What Trump says and does, and investors’ reaction, will be closely monitored by Bank of Japan policymakers, who - barring any market ructions - have hinted strongly at raising interest rates by a quarter point to 0.5% on Friday.
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However, Yasunari Ueno, chief market economist at Mizuho Securities, argues that a hike this week is likely to be followed by a long pause, which is one reason why Japanese yields remain depressed.
The 10-year JGB yield fell 1 basis point to 1.19% by 0440 GMT. Benchmark 10-year JGB futures rose 0.07 yen to 141.07 yen. Yields move inversely to bond prices.
The BOJ’s view is “the closer that the policy rate is seen as being to ‘neutral’, the greater the need to proceed more gradually with further adjustments”, Ueno said.
“Market participants might thus have good reason to suppose that the interval between a January 2025 rate hike and any further ‘normalisation’ move would be somewhat longer than the roughly six-month gap between the July 2024 and January 2025 hikes, particularly considering that an upper house election is set to be held in July 2025.”
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The two-year JGB yield fell 1 bp to 0.675%.
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The five-year yield declined 1 bp to 0.85%.
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The 20-year yield lost 1 bp to 1.90%, and the 30-year yield slipped 1.5 bps to 2.27%.
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