TOKYO: Japanese government bond (JGB) yields slipped on Thursday, tracking a decline in their US peers, although moves were rangebound ahead of the Bank of Japan’s (BOJ) monetary policy decision this week.
US Treasury yields, with which the JGB market tends to move in tandem, fell overnight after cooler-than-expected domestic consumer prices raised hopes the Federal Reserve would begin cutting interest rates in coming months.
Expectations were only partly dampened by new Fed projections that pointed to some caution.
The 10-year JGB yield fell 2 basis points (bps) to 0.965%, while the two-year JGB yield edged down 1.5 bps to a one-month low of 0.32%.
But investors are taking a cautious stance as the BOJ begins its two-day policy meeting on Thursday.
While Japan’s central bank is expected to keep rates steady, market players were waiting to see if it will begin tapering its bond purchases.
The BOJ will consider trimming its bond buying this week, according to the Nikkei newspaper.
JGB yields track US peers higher; BOJ decision looms
Reuters reported last week that policymakers were brainstorming ways to slow its bond buying and may offer fresh guidance at the June meeting.
“Rather than cutting its JGB purchases and restoring market function all at once, I think the BOJ will try to do it while limiting jumps in yields as much as possible,” Yoshiro Sato, an economist at Resona Holdings said.
Japan’s central bank currently purchases bonds at a pace of about 6 trillion yen ($38.21 billion) per month, just enough to maintain its balance sheet.
Investors have been on alert for an official cut following a surprise reduction to the central bank’s bond purchases on May 13.
The five-year yield touched its lowest since May 16 at 0.53% before inching up.
It was last 0.5 bp lower at 0.55%.
The 20-year JGB yield and 30-year JGB yield both slid 2.5 bps to 1.77% and 2.115%, respectively.
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