TOKYO: Yields on the longest Japanese government bonds rose on Thursday from multi-month lows amid pressure from elevated US yields and as month-end buying by pension funds dried up.
The 20-year JGB yield was up 2.5 basis points to 1.205%, as of 0530 GMT, after dropping as low as 1.14% in the previous session for the first time since mid-December.
The 30-year yield also rose 2.5 basis points to reach 1.380%, rebounding from as low as 1.335% on Wednesday, a level last seen in early October. Benchmark 10-year JGB futures fell 2 yen to 146.67.
The cash note had yet to trade, and last yielded 0.5%, the upper limit under the Bank of Japan’s yield curve controls. Traders said an auction of 10-year notes went smoothly.
US Treasury yields had also climbed in Tokyo hours, with the 10-year rising to the highest since Nov. 10 at 4.028%.
US economic data has continued to run hot despite an aggressive rate-hiking campaign, and commentary from Fed officials has remained hawkish, with Minneapolis Fed President Neel Kashkari overnight saying he would raise his forecast for the path of interest rates at this month’s policy meeting.
“The Fed has kind of confirmed they will raise the terminal rate,” above what they’ve signaled so far, lifting US yields, said Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo.
“The superlong sector in JGBs has been rallying like crazy for the last several days against a backdrop of higher US yields, so (today’s action) is not just a reaction to higher US yields,” he added.
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“The flattening of the curve has gone too far for supply-demand factors.”
The two-year JGB yield fell 0.5 basis point to -0.040%, while the five-year yield was flat at 0.200%.