TOKYO: Japanese government bond (JGB) yields declined on Monday, tracking US Treasury yields, while investors sought more clues on whether the Bank of Japan will raise interest rates at its monetary policy meeting next week.

US Treasury yields slid to a six-week low on Friday after the release of November payrolls data, as investors considered the numbers as a green light to one more rate cut by the Federal Reserve at its Dec. 17-18 meeting.

The 10-year JGB yield touched a one-month low of 1.03% and was last down 1 basis point (bp) at 1.04%, while 10-year JGB futures rose 0.15 points to 143.26 yen.

With Japan’s central bank set to meet on Dec. 18-19, investors were also keeping an eye out for a clearer indication of its interest rate path.

Market expectations have been volatile after media reports last week suggested the BOJ may stand pat, while normally dovish board member Toyoaki Nakamura said he was “not opposed to rate hikes”.

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Analysts at Mizuho Securities’ fixed income department expect the seemingly inconsistent communications are part of a strategy to give the central bank flexibility.

“We think the Bank is simply taking a balanced approach that assumes a January rate hike but keeps open the option of a December hike in the event of a sharp decline in the yen,” Chief Bond Strategist Noriatsu Tanji and Market Analyst Yurie Suzuki wrote in a report on Friday.

Markets currently have an about 30% probability factored in for a rate increase in December.

The two-year JGB yield, which corresponds more closely with monetary policy expectations, fell 1.5 bps to 0.57%, its lowest since Nov. 21.

The five-year yield slipped 1 bp to 0.71%.

The 20-year JGB yield and 30-year JGB yield both ticked down 1 bp to 1.845% and 2.25%, respectively.