TOKYO: Japanese government bond (JGB) yields rose on Wednesday, tracking overnight US Treasury yields higher, with sentiment weighed by speculation that the Bank of Japan (BOJ) would end its negative rate policy soon.
The two-year JGB yield, which is highly sensitive to the change in the BOJ’s negative rate policy, inched up 0.5 basis point (bp) to 0.170%, maintaining its highest level since July 2011 scaled in the previous session.
“The Japanese yields tracked the rises in US Treasury yields, but at the same time the expectations that the BOJ would end its negative rate policy as early as March are priced in,” said Yuki Matsuda, market analyst at Mizuho Securities.
Investors were also cautions ahead of an auction for the bonds for two-year maturity in the next session, Matsuda said.
US Treasury yields logged moderate gains on Tuesday as investors awaited key inflation data due on Thursday, seeking more clarity on when the Federal Reserve might start cutting interest rates.
In Japan, the 10-year JGB yield rose 0.5 bp to 0.695% and the 20-year JGB yield rose 2 bps to 1.445%. The five-year yield rose 1 bp to 0.355%.
The market perceives that the BOJ is under pressure to end its negative rate policy amid signs of increasing prices and wages.
Japan’s core consumer inflation slowed for a third consecutive month in January, but beat forecasts and remained at the central bank’s 2% target.
JGB yields rise as Japan’s inflation data fuels caution on BOJ normalisation
According to a Reuters poll, more than 80% of economists expected the BOJ to pull short-term interest rates out of negative territory in April.
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