TOKYO: Japanese government bond (JGB) yields slumped on Tuesday, as investors digested the Bank of Japan’s (BOJ) dovish comments at the conclusion of its two-day policy meeting on Friday.
The 10-year JGB yield fell 4 basis points (bps) to 0.82%, while 10-year JGB futures rose 0.52 points to 144.99 yen. Bond yields move inversely to prices.
The BOJ kept interest rates steady on Friday and its governor said the central bank could afford to spend time eyeing the fallout from global economic uncertainties, signalling it was in no rush to raise borrowing costs further.
Japanese markets were closed on Monday for a public holiday.
While the decision to stand pat was widely expected, BOJ Governor Kazuo Ueda’s remarks at a press conference following the meeting were “more dovish than expected,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.
“I think a rate hike at the end of the year or the beginning of (next) year is still the main scenario for many people. However, watching Friday’s press conference, those expectations may have weakened,” he said.
Ueda said the central bank was ready to raise rates if its economic and price forecasts were achieved but that the timing would depend partly on whether the U.S. economy achieved a soft landing, or suffered a bigger-than-expected downturn.
The two-year JGB yield, which corresponds more closely with monetary policy expectations, slid 3.5 bps to a one-month low of 0.355%.
The five-year yield was down 4 bps at 0.465%, its lowest since Aug. 15.
Ueda is scheduled to speak at an event later in the day, and market players will scrutinise his comments to confirm their current dovish interpretation.
On the superlong end, the 20-year JGB yield dropped 3.5 bps to 1.66%, while the 30-year JGB yield edged down 1.5 bps to 2.065%.
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