TOKYO: The benchmark 10-year Japanese government bond yield hit a 9-1/2-year peak on Wednesday, after the Bank of Japan (BOJ) refrained from intervening in the market to check its rise.
The 10-year JGB yield rose 1 basis point (bp) to 0.675% as of 0444 GMT, its highest level since January 2014.
It had edged higher to 0.67% after the BOJ refrained from expanding buying at its regular operation announcement time in the Tokyo morning, and then stepped higher again after the central bank let a regular afternoon announcement time pass without action.
The 20-year JGB yield rose 1 bp to 1.41%, the highest since Jan. 13.
The five-year yield rose 0.5 bp to 0.24%, a level last seen on Feb. 22.
The advance in Japanese yields came even as US 10-year Treasury yields took a breather from their breathless climb to a 16-year peak of 4.366% on Tuesday, retreating to as low as 4.298% in the Asian session.
“Current yield levels are not high enough, because of the rise in US Treasury yields and Japanese inflation,” said Kentaro Hatono, a fixed-income fund manager at Asset Management One.
“Fair levels are higher than before, but it will take time,” he said, predicting a rise in the 10-year yield to 0.9% within six months, and to around 1.75% for the 20-year yield.
JGB yields rise as traders gauge BOJ, US Fed policy paths
Investors are watching for what yield levels would make the BOJ uncomfortable enough to conduct additional buying to stem their rise.
On Aug. 3, the BOJ conducted unscheduled buying of bonds after the 10-year yield hit 0.655%, its second emergency purchases that week.
The yield had surged from as low as 0.435% on July 27, the day before the BOJ unexpectedly doubled the effective cap under its yield curve control to 1%.
“At what level the BOJ will step in again in a big focus for the market now,” said Kazuo Kamitani, an equity strategist at Nomura Securities.
The two-year JGB yield, which is anchored more closely by the negative short-term policy rate, was flat at 0.02%.
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