TOKYO: Japanese government yields ticked down on Monday, with the two-year yield dropping below zero for the first time since July, as expectations of an end to the Bank of Japan’s (BOJ) ultra-loose monetary policy continued to recede.

The 10-year JGB yield fell 3 basis points (bps) to its lowest since Dec. 20 at 0.555%.

The two-year JGB yield ticked down 0.5 bp to -0.005%. Benchmark 10-year JGB futures were last up 0.28 yen at 147.67 yen, after reaching a roughly six-month high of 147.74 yen earlier in the session.

Bond yields move inversely to prices.

Expectations of a January exit from the BOJ’s negative interest rate policy have largely declined in the wake of the devastating earthquake that hit western Japan on New Years Day and last month’s dovish comments by Governor Kazuo Ueda.

“If the BOJ doesn’t raise interest rates in April, I think the market will judge that the bank isn’t willing to do so,” as the reasons not to exit from its super easy monetary policy increase, said Resona Holdings Strategist Takeshi Ishida.

JGB yields fall amid fading bets on BOJ policy shift

The central bank is expected to broadly maintain its projection at its January meeting next week that trend inflation will stay near its 2% target in the coming years, say sources familiar with its thinking.

A slide in US Treasury yields on Friday also weighed on Japanese yields, as investors raised bets of an early interest rate cut by the Federal Reserve this year.

The five-year yield slipped 1.5 bps to 0.160%, its lowest since July 28.

On the superlong end, the 20-year yield was down 2.5 bps at a near four-week low of 1.280%. The 30-year yield fell 2.5 bps to 1.585%.