TOKYO: Japanese government bond (JGB) yields rose on Thursday as bets on the Bank of Japan’s early interest rate hike revived, after heavy bond buying was triggered this week, following the comments by the central bank’s governor Kazuo Ueda.
The 10-year JGB yield rose 3 basis points to 1.395%. The two-year JGB yield rose 2 bps to 0.815% and the five-year yield rose 3 bps to 1.045%.
“The yields started falling after comments from BOJ Governor Ueda on Friday last week. His comments became a trigger for closing short positions,” said Shinji Ebihara, chief fixed income strategist at Tokio Marine Asset Management.
“But because the market believes that the BOJ will keep raising rates, there were little cues for investors to continue buying JGBs.”
JGB yields retreat from over decade high after BOJ chief’s comments
Ueda said on Friday the central bank stood ready to increase government bond buying if long-term interest rates rise sharply, halting the yields’ sharp rises.
The two-year JGB yield, the most sensitive to the BOJ’s policy, fell to as low as 0.78% this week, its lowest level since Feb. 14. A weak outcome of the two-year JGBs earlier in the day also hurt sentiment.
“Investors are cautious about active bets because there will be auctions for 10-year and 30-year JGBs next week,” Ebihara said.
Japan’s bond yields rose also after the country’s top currency diplomat, Atsushi Mimura, said on Wednesday he did not see any disparity between recent rises in the yen and a slew of positive economic data.
The comments underscored Tokyo’s view that the currency’s rebound was broadly in line with an improving economy that could justify hikes in Japan’s interest rates.
The 20-year JGB yield rose 2.5 bps to 2.05% and the 30-year JGB yield rose 1.5 bps to 2.335%.
The 40-year JGB yield rose 3 bps to 2.65%.