TOKYO: Japanese government bond (JGB) yields declined on Friday, tracking US Treasury yields, and easing from multi-week highs hit in the previous session.

Data on Thursday showed an increase in US weekly jobless claims and the smallest annual jump in inflation since February 2021, suggesting the Federal Reserve is on track to cut interest rates next month.

US Treasury yields were mixed overnight following the data, but trended lower during Asian trading hours.

The 10-year JGB yield slipped 1 basis point to rest at 0.945%, off Thursday’s five-week high of 0.955%.

JGB yields touched their highest since early August this week, following their US peers, as bets shifted toward a more gradual pace of Fed rate cuts following a blowout jobs report last Friday.

Japan’s improving economic conditions and receding US recession worries are likely to help bring prospects of a December or January rate hike back into view, even as the nation’s new government complicates the politics around monetary policy.

“We believe yields will ultimately be prone to strengthening upward pressure, especially in the short/medium-term sectors, on a revival of BOJ rate hike expectations,” Barclays analysts said in a note.

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A further rise in yields may be limited for now, however, due to uncertainty ahead of a domestic general election scheduled for Oct. 27, they said.

New Japanese premier Shigeru Ishiba, known for being a critic of easy monetary policy, stunned markets earlier this month when he said Japan was not ready for further rate hikes.

The 20-year JGB yield and 30-year yield both fell 2 bps to 1.73% and 2.165%, respectively. The two-year yield ticked down 0.5 bp to 0.405%.

The five-year yield was down 1.5 bps at 0.57%. Benchmark 10-year JGB futures rose 0.12 point to 144.02 yen.