TOKYO: Japanese government bond (JGB) yields struggled for direction on Monday, with the 10-year JGB yield tracking US Treasury yields lower, as the market pondered the impact of recent yen weakness on the Bank of Japan’s (BOJ) policy outlook.
Benchmark 10-year JGB futures rose 0.19 points to 143.98 yen.
The 10-year JGB yield fell 1 basis point (bps) to 0.955%, after touching its highest since Aug. 2 at 0.975% on Friday.
US Treasury yields, which the JGB market tends to track, fell on Friday as the market consolidated after large yield increases over the past month.
The yen could be influencing the direction of yields as well, said Hiroshi Namioka, chief strategist at T&D Asset Management.
“It really should be yields that affect the exchange rate, (but) there seems to be a mechanism at work where the exchange rate is impacting yields” as bond market participants focus on foreign exchange moves, Namioka said.
The Japanese currency briefly strengthened to as low as 149.09 per dollar on Monday after touching 150.32 last week.
Its slide back toward 150 per dollar has revived bets for another interest rate hike by the Bank of Japan (BOJ) in coming months, putting additional upward pressure on yields.
While market players expect the BOJ to stand pat at its monetary policy meeting next week, expectations have increased for a December or January rate hike.
JGB yields rise on higher US yields, BOJ policy tightening expectation
A slim majority of economists polled by Reuters earlier this month called for rates to remain unchanged until early next year.
Investors were also focused on an auction for 20-year JGBs on Thursday, followed by a general election for Japan’s lower house on Oct. 27.
The 20-year JGB yield was flat at 1.75%, while the 30-year JGB yield rose 2 bps to 2.165%.
The two-year JGB yield declined 0.5 bp to 0.43%.
The five-year yield fell 1 bp to 0.575%.
Comments
Comments are closed for this article.