Japanese government bonds fell on Friday, with futures retreating further from a seven-week high, after US Treasuries were hit by the Federal Reserve's decision to raise the interest rate it charges banks for emergency loans. The Fed on Thursday raised the discount rate to 0.75 percent to 0.50 percent, a small move but adding to expectations the US central bank could move as soon as later this year to lift the benchmark federal funds rate from its current ultra-low level near zero.
The Treasury yield curve bear-flattened, with the two-year/10-year yield spread tightening from record wide levels touched earlier in the week, as the two-year note yield hit a one-month high on speculation over the Fed exiting its low interest-rate policy.
Bank of Japan Governor Masaaki Shirakawa on Thursday fended off government pressure to do more to fight deflation by suggesting the bank is not inclined to set an inflation target or buy more government debt. But analysts see the central bank easing further if economic conditions worsen. March 10-year JGB futures dropped 0.13 point to 139.47, after hitting a seven-week high of 139.76 earlier in the week.
The two-year yield was unchanged at 0.150 percent. The five-year yield gained 1 basis point to 0.505 percent. The benchmark 10-year yield climbed 1.5 basis points to 1.330 percent. The 20-year yield rose 0.5 basis point to 2.165 percent ahead of an auction of the maturity next week. The five-year yield has been hovering near a four-year low as domestic banks, flush with cash under the BoJ's policy and slack lending, have been parking their money in midterm notes.
Comments
Comments are closed.