TOKYO: Japanese government bond yields fell to a two-week low on Friday, tracking overnight U.S. Treasury yields lower, while yen’s gain against the dollar prompted investors to buy safe-haven debt.
The 10-year JGB yield fell 2 basis points (bps) to 0.625% and the 20-year JGB yield fell 3.5 bps to 1.345%, their lowest level since Aug. 18.
“The Japanese yields tracked U.S. peers lower but also the rebound of the yen has drove risk-off sentiment, which prompted investors to buy JGBs,” said Hideki Shibata, senior strategist at Tokai Tokyo Research Institute.
U.S. Treasury yields fell overnight after data showing inflation came in line with the consensus forecast, while jobless claims fell, reinforcing expectations the Federal Reserve will hold interest rates steady at the September policy meeting.
In Asian trading, the dollar fell to a one-week low against the yen, weighed down by declines in Treasury yields.
“It looks like the U.S. yields have peaked, and the Fed is set to cut its rate sooner or later, which would cap rises in Japanese yields,” said Shibata.
The 10-year yield rose only to as high as 0.675% and started falling even after the Bank of Japan in July widened the trading band of the benchmark bonds to 1%.
The absence of foreign investors who had attacked the Bank of Japan’s ultra low rate policy is also another reason for the yields to hover at this level, he said.
On Friday, the 30-year JGB yield fell 2 bps to 1.635%, its lowest since Aug. 18.
The 40-year JGB yield fell 2 bps to 1.810%.
The two-year JGB yield fell 0.5 bp to 0.020% and the five-year yield fell 1 bp to 0.210%.
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