TOKYO: Japan’s 10-year government bonds were flat on Friday, keeping the yields at just below the Bank of Japan’s upper limit of the tolerance band, despite overnight strength in US Treasury yields.
The 10-year yield were last at 0.245%, right below the cap of 0.25% that the BOJ imposes through its yield curve control (YCC) policy.
The yield on the benchmark US 10-year Treasury rose overnight, after a reading on the labor market showed unemployment benefit claims rose by the most in four months last week.
“The 10-year bond yields just can’t move, with the upward pressure from overseas, and the BOJ’s efforts to contain the rise,” said Noriatsu Tanji, chief bond strategist, at Mizuho Securities.
Yields on nine-year bonds maturing in September 2031, which are outside the BOJ’s target for yield control, rose as high as 0.265%.
JPMorgan analysts Ayako Fujita, Takafumi Yamawaki, and Benjamin Shatil wrote in a research note published on Thursday that they expect the BOJ to scale back its YCC policy from next March, with the most likely option seen to be a raising of the 0.25% cap.
Japan’s 10-year government bond yields rise close to BOJ ceiling
Noriatsu Tanji, chief bond strategist, said he sees no need for a change in the central bank policy. “Higher rates may not be able to reverse the weak yen, rather it could be negative to the economy,” Tanji said.
“Potential rate hikes could bring more risks than returns,” he said.
Yields on longer-end notes rose, with the 20-year JGB yield rising 0.5 basis point to 0.960% and the 30-year JGB yield climbing 1 basis point to 1.360%. The 40-year JGB yield rose 0.5 basis point to 1.540%.
The two-year JGB yield climbed 0.5 basis point to -0.070%.
The five-year bonds were not traded, the yield stayed at 0.035%.
Benchmark 10-year JGB futures fell 0.28 point to 148.57, with a trading volume of 9,108 lots.
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