TOKYO: Japanese government bond (JGB) yields struggled for direction on Wednesday, as concerns about another rate hike as soon as December limited safe-haven bids following Ukraine’s strike against Russia overnight.
Ukraine used US ATACMS missiles to strike Russian territory on Tuesday, taking advantage of newly granted permission from the outgoing administration of US President Joe Biden on the war’s 1,000th day.
The news sent US Treasury yields lower on Tuesday, but yields have since edged higher during Asian trading hours.
Buying of JGBs was likewise limited, with investors weighing the possibility that the Bank of Japan (BOJ) could raise interest rates again as soon as December.
The 10-year JGB yield slid as low as 1.055% before reversing course. It was last flat at 1.065%, while 10-year JGB futures were down 0.01 point at 142.88 yen.
“There was a move to buy today due to demand for safe assets, but we’re in a situation where the upside (of bond prices) is heavy,” said Makoto Suzuki, senior bond strategist at Okasan Securities.
Investors were awaiting additional economic measures from Japan’s new administration and plans on JGB issuance in the next fiscal year.
At the same time, the market is factoring in another rate hike in either December or January.
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On Monday, BOJ Governor Kazuo Ueda said Japan’s economy was progressing towards sustained wages-driven inflation and warned against keeping borrowing costs too low, leaving open the chance of a rate hike in the coming months.
Ueda is scheduled to speak again on Thursday.
The two-year JGB yield, which more closely corresponds with monetary policy expectations, ticked up 0.5 bp to 0.555%.
The five-year yield was also up 0.5 bp at 0.71%.
The 20-year JGB yield slid 0.5 bp to 1.885% ahead of an auction for the bonds on Thursday. The 30-year JGB yield was flat at 2.285%.
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