TOKYO: Japanese government bond (JGB) yields rose on Monday, with the benchmark 10-year yield hitting a more-than-decade high, in line with a rise in US Treasury yields last week, while investors continued to evaluate the interest rate outlook in Japan.
The 10-year JGB yield earlier climbed to its highest since April 2011 at 1.32%.
It was last up 1.5 basis points (bps) at 1.315% as of 0608 GMT, while 10-year JGB futures were down 0.03 points at 140.02 yen.
US Treasury yields rose on Friday as strong jobs data revisions and a decline in the unemployment rate were seen as reflecting a solid labour market. On Friday, Japanese Prime Minister Shigeru Ishiba also had his first White House summit, which passed without incident.
While upward pressure on JGB yields remained, moves were range-bound as investors awaited further guidance on the pace and extent of additional rate hikes by the Bank of Japan (BOJ).
Markets currently have about 34 bps of rate increases factored in for the rest of this year following a hawkish lean in recent BOJ communications and supportive economic data last week.
“The market continues to price in an increased probability of the policy rate rising to around 1% and a higher risk of the BOJ hiking beyond that level,” Mizuho strategists Noriatsu Tanji and Yurie Suzuki wrote in a note on Friday.
JGB yields hit fresh multi-year highs as rising wages drive BOJ’s rate hike bets
However, they remain sceptical that the 10-year JGB yield will be able to continue rising over the longer term, with economic fundamentals lacking the strength to push rate hike expectations higher than they currently are, they said.
The two-year JGB yield was flat at 0.795%, while the five-year yield ticked up 0.5 bp to 0.99%, its highest level since October 2008.
The 20-year JGB yield rose 1 bp to 1.98%.
The 30-year JGB yield was up 0.5 bp at 2.29%.
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