TOKYO: Japanese government bond (JGB) yields rose on Tuesday, tracking strength in their US peers, while investors remained cautious regarding Japan’s monetary policy outlook and the central bank’s tapering plans.
The 10-year JGB yield edged up 1 basis point (bp) to 0.935%, following US Treasury yields upward as investors consolidated positions ahead of a slew of economic data and Federal Reserve speakers this week.
But after the Bank of Japan (BOJ) on Friday pushed back announcing details of its quantitative tightening plan until next month, there continues to be a strong sense of uncertainty in the market, said Makoto Suzuki, senior bond strategist at Okasan Securities.
“Investors will likely want to carefully check the specific plans to reduce (government bond buying) amounts, so it will be a tricky environment to make a move in over the next month.”
Many market participants expected the central bank to begin tapering at its June meeting, and some had bet that decision would be followed by another rate hike in July.
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There’s now a question as to whether the BOJ will raise rates again at the same meeting it begins tapering. With the BOJ still proceeding carefully, the general market view is shifting toward one more rate hike in September or October, said Okasan’s Suzuki.
Economists remain split over the timing of the BOJ’s next interest rate hike, according to the latest Reuters poll.
BOJ Governor Kazuo Ueda said on Tuesday the central bank could raise interest rates next month, depending on economic and price data available at the time.
“Our decision on bond-buying taper and interest rate hikes are two different things,” Ueda told the parliament.
The 20-year JGB yield climbed 3.5 bps to 1.795%.
The 30-year JGB yield rose 4 bps to 2.16%.
The two-year JGB yield and five-year yield both inched up 0.5 bp to 0.29% and 0.51%, respectively.
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