TOKYO: Benchmark 10-year Japanese government bond yields hovered at their highest level in almost a decade on Wednesday, with investors focused on a slew of key central bank decisions that include the US Federal Reserve and the Bank of Japan (BOJ).
The 10-year yield rose 0.5 basis point (bp) to 0.720%, reaching the level for the third time in six trading sessions.
Prior to that, it had not been this high since January of 2014.
The yield rose after BOJ Governor Kazuo Ueda suggested in an interview with the Yomiuri newspaper earlier this month that the central bank’s negative interest rate policy could end within this year.
Japanese yields also received upward pressure on Wednesday from an overnight rise in equivalent US Treasury yields to 16-year highs.
Traders expect the Fed to leave rates unchanged later in the day, but lay 40% odds on a further quarter-point hike this year, according to CME FedWatch tool.
Japanese bond investors are wary of a hawkish shift in the BOJ’s tone when it concludes a two-day meeting on Friday - a view shared by Shoki Omori, chief Japan desk strategist at Mizuho Securities.
“The BoJ will likely keep their optionality and flexibility of their policy toolkit by keeping their cards close,” Omori added.
JGB yields rise as investors eye Fed, BOJ policy meetings
“At this point, they do not have to rush and make a major policy change.” Benchmark 10-year JGB futures edged down 0.02 yen to 145.5.
The 20-year and 30-year JGB yields each rose 0.5 bp to 1.455% and 1.705%, respectively.
The five-year yield also added 0.5 bp to 0.285%, although the two-year yield fell 0.5 bp to 0.025%.
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