TOKYO: Japan’s 10-year government bond yield scaled its highest in 4-1/2 months on Friday amid speculation that the Bank of Japan (BOJ) would tweak its ultra-loose monetary policy this month.
The 10-year JGB yield touched 0.485%, its highest since March 10.
By midday break, the yield slipped to 0.480%, but still up 1.5 basis points (bps) from the previous session.
“Japan’s yields rose across the curve despite declines in the US Treasury yields overnight.
So, there must be catalysts that are unique to Japan,“ said Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Benchmark 10-year Treasury yields fell to a two-week low, and two-year yields were the lowest since mid-June overnight, as inflation moderated, boosting bets that the Federal Reserve will stop hiking interest rates after an expected 25-basis-point hike later this month.
Japan’s 10-year bond yield started climbing sharply since Friday last week, underpinned by strong growth of Japan’s base salary, which soared 1.8% year-on-year in May, the biggest increase since February 1995.
Wage growth and sticky inflation are key factors on the BOJ’s radar as the central bank considers if and when it should unwind its ultra-loose monetary stimulus.
JGB yields fall ahead of 20-year note auction
Japan’s Yomiuri newspaper reported on Friday the BOJ is likely to raise its price projection for this fiscal year to between 2% and 2.9% in its quarterly projections.
The BOJ is scheduled to have a two-day policy meeting starting July 27.
The 20-year JGB yield jumped 3 bps to 1.120% and the 30-year JGB yield climbed 3 bps to 1.380%.
The five-year yield rose 1 bp to 0.135%.
The 40-year JGB yield was flat at 1.500%.
The two-year JGB yield was flat at -0.040%.
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