TOKYO: Japanese government bond yields rose to fresh decade highs on Thursday, tracking gains in US Treasury yields amid fears that the Federal Reserve will keep interest rates higher for longer.
The 10-year JGB yield rose 2.5 basis points (bps) to 0.830%, its highest since July 2013.
The five-year yield rose 2.5 bps to 0.370%, hitting its highest since May 2013.
The yields extended their climb even after the Bank of Japan (BOJ) intervened in the previous session to contain the rise, offering to purchase bonds with maturities of five to 10 years and 10 to 25 years in an emergency bond buying operation.
“The Japanese yields were on the rise mostly because US yields rose, so what the BOJ could do was limited,” said Chotaro Morita, chief strategist at All Nippon Asset Management and president of Walls & Bridges.
Treasury yields at long- and short-dated tenors hit 16-year highs during Asian trade and selling pushed the 10-year yield to almost 5% as markets wagered that Federal Reserve Chair Jerome Powell would strike a hawkish tone on Thursday as the economy remains strong.
“As long as the BOJ has a mandate to control the long-term yield at around 0.5%, it has to take some action if the yield approaches closer to 1%,” Morita said.
Under its yield curve control policy, the BOJ guides short-term interest rates at -0.1% and the 10-year bond yield around 0%.
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It also has an allowance band of 50 basis point set either side of the yield target, as well as a hard cap of 1.0% adopted in July.
Powell is participating in a discussion on the economic outlook at the Economic Club of New York at 1600 GMT. The 20-year JGB yield rose 3 bps to 1.605%, its highest since September 2013.
The 30-year JGB yield rose 1.5 bps to 1.775%. The 40-year JGB yield rose 1.5 bps to 2.045%.
The two-year JGB yield rose 1 basis point to 0.075%.
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