TOKYO: Japanese government bond (JGB) yields fell sharply on Friday as reports of a possible missile strike drove safe-haven flows.
Israeli missiles have hit a site in Iran, ABC News reported late on Thursday, citing a US official, while Iranian state media reported an explosion in the center of the country, days after Iran launched a retaliatory drone strike on Israel.
Benchmark 10-year JGB futures jumped 0.42 yen to 144.83 yen in the wake of the reports.
The 10-year JGB yield, which moves inversely to bond prices, fell 4 basis points (bps) to 0.825%, its sharpest drop since early February.
“For the moment, a risk-off mood is spreading, and money is flowing to government bonds as a flight to safe assets,” said Keisuke Tsuruta, a fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
US Treasury yields saw steep declines, reversing from near five-month highs.
Gold and crude oil also jumped following the media reports, while the yen, which has languished near 34-year lows against the US dollar, strengthened on safe-haven gains.
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The 20-year JGB yield fell 3 bps to 1.595%, while the 30-year JGB yield declined 3.5 bps to 1.875%.
On the short end, the five-year yield was down 2.5 bps at 0.445%.
Meanwhile, Bank of Japan Governor (BOJ) Kazuo Ueda said on Thursday the central bank may raise interest rates again if the yen’s declines significantly push up inflation.
His remarks heighten the chance the BOJ will revise up its price forecasts next week and project inflation to stay around its 2% target through early 2027, which would boost market expectations of another rate hike this year.
The central bank will hold its April monetary policy meeting next week.
Japan’s core inflation slowed in March due to mild rises in food prices while staying comfortably above the central bank’s 2% target, government data showed on Friday.
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