TOKYO: Japanese government bond (JGB) yields rose on Tuesday, with the two-year yield reaching the highest since 2009, tracking US peers after robust retail sales figures reinforced the view that the Federal Reserve won’t hurry to cut interest rates this year.
The two-year JGB yield added 0.5 basis point (bp) to 0.275% as of 0420 GMT, the highest in 14-and-1/2 years.
The five-year yield climbed 1.5 bps to 0.495%, a 13-year peak.
The 10-year yield rose 0.5 bp to a five-month top at 0.865%.
Equivalent US Treasury yields stood at 4.6139% in Asian trading, after reaching 4.6630% overnight, also a five-month peak.
The better-than-expected US retail sales data added to heated consumer price figures from last week, indicating inflation remains sticky.
Futures markets are now pricing in 41 basis points in Fed rate cuts by the end of December, down from more than 160 basis points in expected cuts at the start of the year.
By contrast, the Bank of Japan (BOJ) raised rates for the first time since 2007 last month, but policymakers have signaled no rush to hike again.
“We are waiting for the BOJ, but the next hike is probably July at the earliest, so the key focus now is on global factors,” Shinichiro Kadota, chief Japan FX strategist at Barclays said.
Japan’s 2 year bond yield hits 13-year high as BOJ chief hints chance of another rate hike
“We’re definitely up to good levels that we haven’t seen for a while (for Japanese yields), so we could potentially see demand, but I think the risk is still to the upside.”
The 20-year JGB yield rose 0.5 bp to 1.640%, while the 30-year yield added 1 bp to 1.920%.
Benchmark 10-year JGB futures fell 0.15 yen to 144.26 yen, and earlier reached the lowest since Nov. 2 at 144.12 yen. Bond yields fall when prices rise.
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