Japan bond yield curve twist-steepens ahead of Fed decision
TOKYO: Japan’s government bond yields moved in opposite directions on Wednesday, as fiscal concerns and higher oil prices fuelled inflation worries ahead of the US Federal Reserve’s policy decision. The yield curve, which tracks borrowing costs across different bond maturities, twist-steepened as yields on five- and 10-year bonds declined while those on superlong maturities rose. The benchmark…
Japan's government bond yields moved in opposite directions on Wednesday, driven by fiscal concerns and higher oil prices ahead of the US Federal Reserve's policy decision. As yields on five- and 10-year bonds declined, those on longer maturities rose, causing the yield curve to steepen. The benchmark 10-year Japanese Government Bond (JGB) yield fell by 1 basis point to 3.020%, while the five-year yield dropped by 1.5 basis points to 2.295%.
The 20-year JGB yield climbed by 2 basis points to 3.905%, and the 30-year yield added 4 basis points to 4.190%. The 40-year JGB, Japan's longest tenor, rose by 1 basis point to 4.22%. Reports suggested that Tokyo was considering defence spending worth 3.5% of gross domestic product in the medium term, which likely impacted the market by raising the prospect of fiscal expansion and higher JGB yields.
The weakening yen added to fiscal concerns. Oil prices hovered around the mid-$100-a-barrel range due to disruptions in the Red Sea and cancelled deliveries to European customers. The Federal Reserve is expected to announce a rate hike of a quarter of a percentage point at 2 p.m. EDT, signaling further tightening. Prime Minister Sanae Takaichi may retain an advocate of expansionary policy in her cabinet reshuffle, potentially leading to unwinding of expectations for fiscal stimulus in the bond market.
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