TOKYO: Japanese government bond (JGB) yields dipped across the curve on Friday, after a hot US inflation report that put monetary policy outlooks in both countries firmly in the spotlight saw yields jump the previous day.
Yields, which move inversely to bond prices, spiked to multi-year highs on Thursday as their US peers surged in the wake of the strong inflation reading, which had investors paring back bets for when the Federal Reserve will first cut interest rates.
After such a sharp jump in yields, analysts said investors appeared to be taking the chance to buy on the dip on Friday.
JGB yields mixed on decent demand at auction, monetary policy concerns
The benchmark 10-year JGB yield, which hit a five-month high of 0.860% on Thursday, fell 1 basis point (bp) to 0.840%. Market expectations for a later start to the Fed cutting rates turned attention to the chance of another rate hike in Japan this year, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.
“It’s a bit difficult (for the Bank of Japan) to move in the opposite direction of the US The fact that it looks like the Fed’s interest rate cuts will come much later has some thinking the BOJ will be able to raise rates” more easily in this environment, he said.
Others believed a languishing yen, which was hovering at its lowest against the dollar in 34 years after the inflation data, could propel Japan’s central bank to raise rates.
Market expectations on the timing of a possible hike have not changed, however, with bets focused on either July or October, analysts said.
Elsewhere on the curve, the two-year JGB yield was flat at 0.265%, while the five-year yield ticked down 0.5 bp to 0.475%.
On the superlong end, the 20-year JGB yield fell 1.5 bps to 1.610%.
The 30-year JGB yield was down 1.5 bps at 1.910%.
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