TOKYO: Japan’s five-year government bond yield hit a 15-year high on Wednesday as a weaker yen accelerated bets for the Bank of Japan to raise interest rates.
The five-year yield rose to 0.685%, its highest level since November 2009, before inching down to 0.68%, up 3 basis points (bps) from the previous session.
The 10-year JGB yield rose 3.5 bps to 1.04%, its highest since Aug. 1.
“The yields tracked overseas peers’ higher but also the yen’s weakness accelerated bets that the BOJ would raise its policy rate soon,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
US Treasury yields rose overnight as bond investors jumped back into the market after a long weekend, and resumed pricing in President-elect Donald Trump’s policies of lower taxes and trade tariffs that are viewed as inflationary.
The yen fell to 154.94 against the US dollar, its weakest since July 30.
The weak yen raises import costs and pushes domestic prices higher.
“Also, the sentiment is weighed down by expectations for an increase in the Japanese government bond issuance to fund tax reduction,” Inadome said.
Japan’s 2 year bond yield hits 13-year high as BOJ chief hints chance of another rate hike
The ruling Liberal Democratic Party (LDP) and its coalition partner Komeito, which lost the lower house majority at last month’s election, have been seeking cooperation with the Democratic Party for the People (DPP), which supports aggressive tax relief and welfare spending.
The 20-year JGB yield rose 2.5 bps to 1.87% and the 30-year JGB yield rose 1.5 bps to 2.275%.
The 40-year JGB yield rose 2.5 bps to 2.6%.
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