Markets

Japanese bonds fall as inflation concerns mount ahead of debt sale

  • Benchmark 10-year JGB yield rose 4 basis points (bps) to 2.515%, closing in on the 29-year high of 2.535%
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TOKYO: Japanese government bonds (JGBs) slumped on Monday as inflationary concerns mounted ahead of a debt sale, with the U.S.-Iran stalemate fuelling energy-driven price pressures.

The benchmark 10-year JGB yield rose 4 basis points (bps) to 2.515%, closing in on the 29-year high of 2.535% reached on April 30, held at 2.475%. The 20-year JGB yield climbed 4.5 bps to 3.4%.

Yields move inversely to bond prices.

Oil prices jumped on Monday after the United States and Iran failed to agree to a peace proposal drafted by Washington while the Strait of Hormuz, which typically handled about a fifth of global oil and liquefied natural gas flows prior to the Middle East war, remained largely closed.

Japan’s Ministry of Finance plans to auction about 2.6 trillion yen ($16.57 billion) in 10-year JGBs on Tuesday.

JGBs little changed ahead of Bessent’s visit, auctions

Investors are likely to be cautious ahead of the sale and policy announcements that may emerge from a visit to Tokyo by U.S. Treasury Secretary Scott Bessent, according to Takayuki Miyajima, chief economist, Sony Financial Group.

“Concerns about oil price-driven inflation appear to be exerting upward pressure on domestic interest rates,” Miyajima said in a note.

“The market is likely to remain weighed down, as participants keep a close eye on developments in the Middle East and price trends.”

The 30-year yield added 4.5 bps to 3.76%, while the yield on the 40-year JGB, Japan’s longest tenor, rose 5 bps to 4.025%.

The two-year yield, the one most sensitive to Bank of Japan policy rates, increased 1.5 bps to 1.385%. The five-year yield rose 3 bps to 1.890%.

The BOJ said on Monday it has appointed Kazuhiro Masaki, a veteran career central banker with expertise on monetary policy, as executive director overseeing its international affairs.