TOKYO : Japanese government bond yields rose to fresh multi-year highs on Monday, defying a climb in the futures market spurred by bets the U.S. Federal Reserve may become less aggressive in tightening policy.
Benchmark 10-year JGB futures ended the day up 0.25 point at 147.85, but the cash 10-year note had yet to trade as of 0655 GMT. It last yielded 0.250 per cent, the upper limit of the BOJ’s policy band.
U.S. 10-year Treasury yields continued a retreat from Friday in Tokyo trading, sinking as low as 4.127 per cent. They touched a fresh 15-year high of 4.338 per cent at the end of last week before beginning their pullback as San Francisco Fed president Mary Daly said it’s time to start talking about a slower pace of rate hikes.
The two-year JGB yield ticked up 0.5 basis point to -0.005 per cent, the highest since January 2016, in a thin market as traders kept an eye on the yen exchange rate for clues on the path of Bank of Japan policy.
Japan’s currency has been volatile following two bouts of sudden, massive appreciation in two days, with traders suspecting intervention by Japanese officials.
However, the impact has been limited, with the yen retracing the bulk of Monday’s sharp move higher within a matter of hours to last trade around 149 per dollar.
If the yen enters the 150-160 per dollar range, that could be enough to boost core inflation into the BOJ’s 2 per cent target range, said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.
“In that case, debate will become much more active about whether the BOJ should keep the current ultra-easy monetary policy,” Kichikawa said.
The 20-year JGB yield rose 5 basis points to 1.245 per cent for the first time since July 2015, while the 30-year yield advanced 7.5 basis points to 1.655 per cent, a level last seen in October 2014.
The five-year yield was flat at 0.135 per cent. On Friday, it had reached 0.140 per cent for the first time since June 2015.
For all the latest business News Click Here
