Japanese bond yields rise with Middle East peace deal elusive

TOKYO: Japanese government bond yields rose off multi-week lows on Monday, as hopes for a peace deal in the Middle East faded with the US and Iran still divided over significant issues.

Yields on 10-year JGB rose 3.5 basis points to 2.69%, after falling to as low as 2.635% on Friday for the first time since May 14.

Ten-year JGB futures fell 0.27 yen to 128.62 yen; yields rise when bond prices fall.

The energy shock from the Iran war has fanned inflation worries, lifting bond yields worldwide.

“Considering that JGB yields fell last week on expectations for the US and Iran to reach an agreement, there is room for yields to rise following reports that President (Donald) Trump has postponed making a decision,” said Mizuho analyst Yuhi Kawano -Yields on 20-year JGBs rose 2.5 bps to 3.595% on Monday; 30-year yields rose 1.5 bps to 3.93%.

Five-year JGB yields rose 3.5 bps to 1.92%; two-year yields rose 1 bp to 1.4%.

The Ministry of Finance will auction around 2.6 trillion yen ($16.3 billion) of 10-year JGBs on Tuesday .

Japanese companies’ pace of annual spending on plant and equipment stalled in the first quarter, data showed on Monday -Bank of Japan policymakers are considering pausing the central bank’s quantitative tightening programme.

Traders see a 70% chance of the BOJ raising rates by a quarter point at its next policy meeting on June 15-16, according to LSEG data.