TOKYO: Japan’s benchmark 10-year government bond yield scaled a 10-year peak on Thursday, pulled by a surge in US yields to 16-year highs.
The 10-year JGB yield added 1.5 basis points (bps) to 0.75%, finally reaching the milestone after spending a week bumping against 0.745%.
JGB investors are now focused more on global yields for trading cues with the country in a “quiet period” between the September and October Bank of Japan policy meetings, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.
Meanwhile, the results of a two-year note auction, which had spurred some caution in the morning following a run of weak sales in recent weeks, was “in line with expectations,” Omori said.
The two-year JGB yield remained 1 bp higher at 0.035% following the result.
Although the Bank of Japan now sets a de-facto ceiling for the 10-year yield following a surprise policy tweak in late July, the rise in the yield has been very gradual, with some pullbacks and plateaus.
“The dynamics are very simple: The BOJ is purchasing heavily, so investors don’t have any JGBs left to sell,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management.
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At the same time, “there is still room for Japanese yields to rise under the current monetary policy framework,” but it may require some tweaks to the size and frequency of the BOJ’s purchases, he said.
Since July 27, the day before the BOJ’s policy shift, the benchmark 10-year yield has risen 31 bps.
Equivalent Treasury yields have risen 55 bps this month alone to touch the highest since October 2007 overnight at 4.642%.
Meanwhile, the 20-year JGB yield added 1.5 bps to reach 1.475%, the highest level since May 2014.
Thirty-year and five-year yields also increased by 1.5 bps each, to 1.725% and 0.30%respectively.
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