TOKYO: Long-dated Japanese government bond yields rose on Wednesday and futures declined, resisting pressure from a sharp drop in US bond yields overnight, as investors positioned for tighter local monetary policy.
The 30-year JGB yield rose 2.5 basis points (bps) to 2.170%, and the 20-year yield added 2 bps to 1.805%, as of 0255 GMT.
The 10-year yield was flat at 0.94%, but 10-year JGB futures fell 0.04 yen to 143.91 yen.
Bank of Japan Governor Kazuo Ueda told parliament on Tuesday that an interest rate rise next month was “certainly possible”, depending on incoming economic data.
Expectations had risen that the central bank would forgo a hike in July after announcing last week that it would outline a reduction of its bond purchase programme at the meeting, on the assumption that doing both at the same risked upending markets.
“I get the feeling that the market is being spun in circles by what the BOJ is doing,” Shoki Omori, chief Japan desk strategist at Mizuho Securities said.
And while Ueda’s hawkish message has trumped the overnight slide in US yields, Japan’s benchmark yield should fall if expectations for Federal Reserve rate cuts build, Omori said.
A 10-year JGB yield of 0.9% “is about the right level”, he said.
JGB yields track US peers higher; BOJ policy concerns remain
The 10-year US Treasury yield dropped as much as 7 bps to 4.2% on Tuesday after a weak reading for retail sales.
The Treasury market is closed on Wednesday for a US public holiday.
Meanwhile, Japan’s five-year bond yield was flat at 0.51% on Wednesday.
Two-year JGBs had yet to trade on the day.
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