TOKYO: Japanese government bond (JGB) yields climbed on Thursday, with short-end yields rising to their highest in more than a decade, as yields tracked their US peers higher and investors pondered another interest rate hike in Japan as soon as December.
The 10-year JGB yield rose 1.5 basis points (bps) to 1.055%, its highest since Aug. 1, while the five-year yield ticked up 0.5 bp to a 15-year peak of 0.69%.
The two-year JGB yield, which corresponds more closely to monetary policy expectations, was 0.5 bp higher at 0.53%, a level last since in December 2008.
US 10-year yields pushed to their highest since July, putting upward pressure on JGB yields, as Donald Trump winning the US Presidential election drove expectations of deficits and a stickier inflationary outlook.
Meanwhile, the yen crossed above 156 per US dollar on Thursday to its lowest since July 23, putting attention firmly on Bank of Japan (BOJ) rate hike expectations.
Data on Wednesday showed Japan’s wholesale inflation accelerated in October at the fastest annual pace in more than a year as renewed yen declines pushed up import costs for some goods. “Yesterday, we saw that corporate prices are quite pronounced.
This is strength that’s noteworthy, so I think the BOJ will hike rates soon,“ said Hiroshi Namioka, chief strategist at T&D Asset Management.
While the market appears split between December and January, Namioka said he expects the BOJ to raise rates again at the end of the year, with the incoming administration under President-elect Donald Trump posing some uncertainties to the outlook.
The 20-year JGB yield rose 2 bps to a four-month high of 1.89%, while the 30-year JGB yield climbed 2.5 bps to 2.3%, its highest since March 2010 as worries about Japan’s fiscal outlook persisted as well.
Benchmark 10-year JGB futures fell 0.13 points to 142.98 yen.
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