Short-term JGB yields jump to multi-decade highs on BOJ rate-hike bets
Japanese government bonds fell on Friday, sending shorter-term yields to historic highs, as expectations firmed around a Bank of Japan interest rate hike next month. The two-year yield, the one most sensitive to BOJ policy rates, added 0.5 basis point (bp) to 1.650%, the highest since May 1995. Yields move inversely to bond prices. The […]
Japanese government bonds declined on Friday, driving shorter-term yields to record highs as the Bank of Japan interest rate hike expectations intensified. The two-year yield surged to 1.650%, the highest since May 1995, while the five-year yield jumped 1.5 basis points to a record 2.135%. The benchmark 10-year JGB yield increased 0.5 basis points to 2.875%.
Three sources close to the BOJ’s plans indicated the central bank plans to raise rates at the earliest opportunity in September, with potential acceleration thereafter. Forex traders are betting on a faster-than-expected rate hike to counter the yen’s depreciation. Former top currency diplomat Mitsuhiro Furusawa of Tokyo told Reuters that BOJ policy shifts could be used to spur yen decline.
Thursday’s data showed Japan’s July producer price index increased 7.2% year-on-year, slightly below expectations but sufficient to strengthen the belief of an imminent hike. Earlier in the day, JGBs followed gains in US Treasuries after mild producer price data dampened hopes for a Federal Reserve rate hike later this month.
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