Japan's 10-year yield falls on risk aversion, debt issuance pledge

TOKYO: Japanese government bond yields fell on Monday as a risk-off mood swept through markets after a selloff in US technology stocks, while Prime Minister Sanae Takaichi’s pledge to control debt issuance also supported sentiment.  

The benchmark 10-year JGB yield eased 3 basis points to 2.9%. Yields move inversely to bond prices.

US Treasuries climbed on Friday, capping a strong week, as a selloff in the AI sector fuelled demand for safer assets. Japan will “appropriately” control the size of its debt issuance, Takaichi said on Monday.

“The sharp fall in US tech stocks looks set to spill over to Japanese AI and chip stocks, and stronger risk aversion is likely to lift bond prices,” Sony Financial Group chief economist Hiroshi Watanabe said in a note.

The Bank of Japan has signalled a shift toward tackling inflation following its September rate hike, with Governor Kazuo Ueda saying on Monday that underlying inflation is “quite close” to the central bank’s 2% target.

The 20-year yield slid 1.5 basis points to 3.790%, while the yield on the 30-year JGB held steady and the yield on the 40-year JGB, Japan’s longest tenor, had yet to trade.

The two-year yield, the one most sensitive to BOJ policy rates, dropped 1.5 basis points to 1.890%, while the five-year yield held steady.