TOKYO: Japanese government bond yields fell on Wednesday, tracking overnight declines in US Treasury yields as markets awaited remarks by Federal Reserve Chair Jerome Powell later this week.
The 10-year JGB yield fell 1.5 basis points (bps) to 0.87% and the 20-year JGB yield also fell 1.5 bps to 1.715%.
US Treasury yields sank on Tuesday, as the prospect of an interest rate cut next month loomed large ahead of the Kansas City Fed’s Jackson Hole economic symposium on Friday.
Japanese yields tracked US peer’s declines but strategists say the current level of yields do not justify the Japanese central bank’s tightening path.
“Given the prospects of the Bank of Japan’s rate hike path, the current level of the five-year bond yield is low,” said Naoya Hasegawa, chief bond strategist at Okasan Securities.
Some 57% of economists said the BOJ will raise interest rates again by year-end, according to a Reuters poll published on Wednesday, with the median prediction for the rate at end-year was 25 basis points higher at 0.50%.
The five-year yield fell 2 bps to 0.475%. The rate on the forward one-year Overnight Index Swap (OIS) maturing in August 2026 was at 0.4975%.
“It might be hard to price in the BOJ’s rate hike at the moment as the yen has gained momentum against the dollar,” said Hasegawa.
JGB yields rise as investors continue to shake off US recession fears
The US currency dipped below the closely watched 145 yen level against the yen earlier in the session as the market awaited Powell’s comments as well as preliminary revisions to US labour data due later in the day.
The market focus is also on a special session of Japan’s parliament on Friday, where the BOJ Governor Kazuo Ueda will discuss the BOJ’s surprise rate hike last month.
The two-year JGB yield fell 0.5 bp to 0.35%.
The 30-year JGB yield fell 1.5 bps to 2.085%.
The 40-year JGB yield fell 0.5 bp to 2.34%.
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