TOKYO: Japanese government bond (JGB) yields rose on Monday after local media reported that Bank of Japan (BOJ) Governor Kazuo Ueda said the central bank could end its negative interest rate policy when its inflation target was in sight.
The 10-year JGB yield jumped 5.5 basis points (bps) to 0.7%, hitting a nine-year-and-eight-month peak.
The sharp rise in the yield comes as investors reacted to Ueda’s interview to the Yomiuri newspaper published Saturday, in which he said the central bank could end its negative interest rate policy when its 2% inflation goal is in sight, indicating possible rate hikes by year-end.
The yields rose as investors anticipated that the BOJ could change its policy sooner than expected, said Makoto Suzuki, senior bond strategist at Okasan Securities.
“The 10-year bond yield could rise further but the sell-off is limited because investors do not own enough JGBs to sell because of the Bank of Japan’s heavy ownership in the Japanese bonds.”
The 20-year JGB yield sat 5.5 bps higher at a seven-month peak of 1.45%.
The 30-year JGB yield rose 4.5 bps to a nearly ten-year high of 1.71%.
On the short end, the two-year JGB yield rose 4 bps to 0.04%, while the five-year yield rose 6 bps to 0.275%, both at their highest levels since January.
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