TOKYO: Japanese government bond (JGB) yields rose on Monday as fears of further escalation in the Middle East conflict eased, with Iran playing down an apparent Israeli drone attack within its borders last week and indicating it had no plans for retaliation.
The response appeared gauged towards averting region-wide war, and JGB yields, which fell sharply across the curve as bonds rallied on safe-haven bids last Friday, bounced back.
Yields move inversely to bond prices.
The 10-year JGB yield rose 5 basis points (bps) to 0.880%, after declining to over a one-week low of 0.825% on Friday.
Benchmark 10-year JGB futures fell 0.48 yen to 144.19 yen.
Meanwhile, as the Bank of Japan’s (BOJ) April meeting fast approaches, BOJ Governor Kazuo Ueda said on Friday the central bank “very likely” will raise interest rates if underlying inflation continues to go up.
Ueda also said the bank would begin reducing its huge bond buying at some point in the future.
JGB yields sink on reports of escalation in Middle East
Although the content was similar to previous remarks, the BOJ chief struck a “more positive tone,” said Ryutaro Kimura, a fixed income strategist at AXA Investment Managers.
“It left a clear impression that the BOJ is squarely focused on the prospect of additional rate hikes in the near future,” he said, adding the chance of a July hike was increasing.
Much of the movement in yields on Monday was due to ebbing geopolitical concerns rather than a reaction to Ueda’s comments, however, with market consensus still leaning toward another hike in October, Kimura added.
The two-year JGB yield climbed 2 bps to 0.275%, while the five-year yield was up 3.5 bps at 0.485%.
On the superlong end, the 30-year JGB yield was 4 bps higher at 1.920%.
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