TOKYO: Japanese government bond (JGB) yields rose on Tuesday, tracking US Treasury yields higher as investors awaited US inflation data due this week, while speculation about when the Bank of Japan (BOJ) would raise interest rates continued.
The 10-year JGB yield was last 2 basis points (bps) higher at 1.055%, while 10-year JGB futures fell 0.15 points to 143.11 yen.
US Treasury yields climbed on Monday ahead of the closely watched Consumer Price Index (CPI) data to see whether stubbornly high price pressures could derail expectations for a Federal Reserve rate cut next week.
Risk appetite was boosted during US market hours on news that China will adopt an “appropriately loose” monetary policy next year, alongside a more proactive fiscal policy to spur economic growth.
In Japan, investors continued to lean toward a January rate hike by the BOJ since media reports last week suggested that the central bank might stand pat this month.
HSBC Chief Asia Economist Frederic Neumann and Economist Jun Takazawa still expect a rate hike in Japan next week.
“We believe the majority of policy board members have enough conviction that broad-based wage growth will continue next year and will choose to move in December, ahead of what could be an eventful January on the US front as Donald Trump takes office,” they wrote in a research note on Monday.
Japan bonds set for weekly drop as PM Ishiba takes office
The BOJ announced on Monday that Deputy Governor Ryozo Himino will speak on Jan. 14, which some analysts pointed to as unusual timing for a board member to speak. The two-year JGB yield, which corresponds more closely with monetary policy, climbed 1 bp to 0.58%.
The five-year yield was up 1 bp at 0.72%, down from a session high of 0.74% after an auction for the bond saw strong demand.
The 20-year JGB yield rose 1.5 bps to 1.855%, while the 30-year JGB yield ticked up 0.5 bp to 2.255%.
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