Japan 2-year yields rise to 31-year high as auctions, rate hikes loom
TOKYO: The two-year Japanese government bond (JGB) yield rose to a 31-year high on Monday amid rising bets on central bank rate hikes and an uncertain environment for debt auctions later in the week. Here are a few details: The two-year yield, the one most sensitive to Bank of Japan policy rates, added 0.5 basis point (bp) to 1.730%, a level not seen since April 1995. The benchmark 10-year JGB…
Japan's two-year government bond yield reached a 31-year high on Monday, driven by increased speculation of central bank rate hikes and uncertainties surrounding upcoming debt auctions. The yield climbed to 1.730%, the highest since April 1995, while the 10-year JGB yield increased by 1 basis point to 2.935%. Inversely related to bond prices, yields signify the return investors receive for lending money to the government.
Federal Reserve Chairman Kevin Warsh suggested the US central bank may need to take "work" if policymakers don't demonstrate confidence that inflation will drop to 2%. Meanwhile, Japan's Ministry of Finance is set to auction 10-year JGBs on Tuesday and 30-year debt on Thursday. Senior rate strategist Ataru Okumura from SMBC Nikko Securities warned that a further tightening of monetary policy by the Federal Reserve could create challenging circumstances for the Bank of Japan and the JGB market, as investor demand for the upcoming bond auctions remains uncertain.
Data revealed that the Tokyo consumer price index (CPI) rose in August, supporting the notion of a Bank of Japan rate increase in September. ANZ's head of FX research, Mahjabeen Zaman, expects the BOJ to hike by 25 basis points in the September meeting, followed by consecutive rate hikes over the next quarters, potentially bringing the terminal rate to 1.75%. The 30-year JGB yield rose 1.5 basis points to 4.135%.
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