Japan bond yields rise as US Treasury selloff persists, BOJ outlook in focus
- The benchmark 10-year JGB yield rose 5 basis points (bps) to 3.11%.
Japanese government bond yields increased, tracking US Treasuries, amid inflation worries and mixed signals on the Bank of Japan's future rate hike pace.
- Rising Japanese government bond yields across maturities.
- Bank of Japan's internal debate on accelerating rate hikes.
- Influence of US economic resilience on global bond markets.
TOKYO: Japanese government bond yields rose on Thursday, tracking higher US Treasury yields overnight, as investors remained concerned about inflation risks and the future pace of central bank rate hikes.
Here are a few details:
The benchmark 10-year JGB yield rose 5 basis points (bps) to 3.11%. Yields move inversely to bond prices.
US Treasury yields rose overnight despite a softer Personal Consumption Expenditures price index reading for August that tempered expectations for a Fed rate hike this month, more so on revised gross domestic product data and ADP job data that highlighted resilience in the US economy.
The 20-year JGB yield climbed 4.5 bps to 3.945%, while the 30-year yield added 6 bps to 4.2%.
The 5-year yield rose 1 bp to 2.385%.
The 2-year yield, which is most sensitive to BOJ policy rates, fell 1 bp to 1.94%, extending a decline from Wednesday after a modestly firm auction for the maturity eased investor concerns.
A quarterly Bank of Japan Tankan survey showed Japanese business confidence hit an eight-year high over July-September amid elevated inflation expectations, bolstering the case for interest rate hikes.
A summary of opinions from the BOJ’s September meeting, at which policymakers raised borrowing costs by 25 basis points to a 31-year high, showed some of them saw the need to accelerate the pace of tightening or moving rates closer to the central bank’s desired level sooner.
At the same time, the summary showed a Cabinet Office representative at the meeting cautioning the potential economic impact of higher borrowing costs and urging caution over further rate increases.
Such comments could have been interpreted by markets as a sign that the BOJ may be slow to act to rein in inflation, said Ryutaro Kimura, a senior fixed-income strategist at BNP Paribas Asset Management.
“If political pressure were to put the brakes on the necessary pace of rate hikes, let alone consecutive hikes, that would add upward pressure on longer-term interest rates through higher inflation-risk premiums,” Kimura said.
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