TOKYO: Japanese government bond yields fell on Wednesday, tracking declines in US yields as concerns about the health of the banking sector and a possible recession resurfaced, spurring capital flight to safer debt securities.
Meanwhile, an auction of two-year JGBs went smoothly, with investors feeling confident that the Bank of Japan won’t raise short-term rates soon.
New BOJ governor Kazuo Ueda oversees his first policy decision on Friday, and the consensus is that the policy framework will remain unchanged, including yield curve control (YCC) settings that keep the 10-year yield pinned within 50 basis points (bps) on either side of zero.
The 10-year JGB yield fell 2.5 bps to 0.45% as of 0545 GMT, while benchmark 10-year JGB futures rose 0.34 yen to 148.08, the highest level this month.
The two-year JGB yield fell 0.5 bp to -0.045%. Ueda on Tuesday stressed the need to keep monetary policy ultra-loose for the time being, adding that tightening now could push down future inflation.
BOJ chief Ueda says JGB buying aimed at meeting price goal, not monetising debt
“It looks to us as if Mr. Ueda is determined to avoid any surprise around changes to YCC by offering clear, ongoing insights into the BOJ’s thinking, backed by detailed price forecasts,” Yasunari Ueno, chief market economist at Mizuho Securities, wrote in a client note.
The 20-year JGB yield declined 3.5 bps to 1.08%, while the 30-year yield slipped 3 bps to 1.31%.
The five-year yield fell 1 bp to 0.15%.
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