Japanese government bonds fall as investors await BOJ rate hike hints

TOKYO: Japanese government bonds slid on Monday as investors awaited signals from the central bank on the timing of its next interest rate increase.

The benchmark 10-year JGB yield rose 1.5 basis points (bps) to 2.450%, creeping higher for a fourth straight session.

The two-year yield, the one most sensitive to Bank of Japan policy rates, increased 0.5 bp to 1.355%. Yields move inversely to bond prices.

The BOJ is expected to keep its key rate steady at 0.75% at the end of its two-day meeting on Tuesday.

That puts the focus on the central bank’s quarterly outlook and what Governor Kazuo Ueda may say about how the Middle East conflict, now in its second month, will impact its policy course.

“Attention is particularly focused on how strongly Governor Ueda will hint at the possibility of a rate hike at the June meeting,” Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said in a note.

“This could alter the market’s expectations for the policy rate path and potentially affect the government bond yield curve.”

The 20-year JGB yield climbed 2.5 bps to 3.320%.

The five-year yield rose 1 bp to 1.840%.

Japanese Prime Minister Sanae Takaichi said on Monday she did not see an immediate need to compile a supplementary budget to cushion the economic blow from the Middle East conflict.‑Reuters