TOKYO: Japanese government bond (JGB) yields rose on Wednesday, with caution pervading ahead of an auction for superlong duration bonds as market players continue to bet on additional interest rate hikes in Japan.
The 10-year JGB yield rose 2 basis points (bps) to1.44%, while 10-year JGB futures fell 0.13 points to 139.2 yen.
Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said the central bank can proceed with interest rate hikes at a pace in line with market expectations, matching recent signalling from other BOJ officials that there is a chance of a near-term increase in rates and bolstering market expectations for further hikes.
But Uchida offered few clues on when and how far the central bank could raise rates, stressing the difficulty of estimating where Japan’s neutral rate of interest could be.
JGB yields climb after poor auction sales, BOJ deputy remarks in spotlight
The two-year JGB yield, which corresponds more closely with monetary policy bets, ticked up 0.5 bp to 0.835%, after earlier touching its highest since October 2008 at 0.84%.
The five-year yield climbed 1 bp to1.07%. Superlong-end bonds saw the biggest selling as investors eyed an auction for 30-year JGBs scheduled to take place on Thursday.
With focus fixed on the pace and extent of additional rate hikes, the sales of 10-year JGBs on Tuesday saw the lowest demand for the bonds since October 2021.
The weak demand at Tuesday’s auction shows uncertainty is “negatively impacting the market,” Citi Research rates strategist Tomohisa Fujiki said in a research note.
“We think a 2.4% yield (for 30-year JGBs) should be sufficiently attractive, but investor appetite for duration looks much weaker than we had expected.
As this is the sector supporting the flattening trend, a weak result could produce significant volatility,“ he added.
The 30-year JGB yield was last up 3.5 bps at 2.405%, a level last seen in October 2008. The 20-year JGB yield also rose 3.5 bps to a near 14-year peak of 2.1%.
Comments
Comments are closed for this article.