JGB Yields Edge Up, Investors Await US & Japan Economic Signals
Sign up for Global Macro Playbook: Stay ahead of the curve on global macro trends.
Japanese government bond (JGB) yields edged higher on Tuesday, tracking a rise in US Treasury yields during Asian trading hours, according to Reuters. Investors are awaiting fresh signals on the economic outlooks for both the United States and Japan.
The 10-year JGB yield rose 0.5 basis point (bps) to 1%, where it has hovered this week, while 10-year JGB futures fell 0.05 points to 143.6 yen.
The US Treasury market, which JGBs typically follow, was closed on Monday for a public holiday but ticked up after trading resumed during Asian hours. US yields reached multi-month highs last week as the market priced in a victory by Republican Donald Trump in the US presidential election. This fuelled concerns that Trump’s economic policies could increase the country’s deficit and stoke inflation, putting upward pressure on JGB yields. A weaker yen following Trump’s win has also revived speculation that the Bank of Japan (BOJ) might raise interest rates as early as December.
However, analysts at Mizuho Securities' fixed income department believe the recent rise in US yields has been "somewhat excessive" and predict that JGB yields will initially fall if US yields decline.
"We expect a decline in U.S. rates would also send USD/JPY lower, thereby quashing expectations of an early BOJ rate hike," Chief Bond Strategist Noriatsu Tanji and Market Analyst Yurie Suzuki said in a report on Friday.
Investors will also be closely watching Japan’s third-quarter domestic production growth data, due on Friday, after a summary of opinions from the BOJ’s October monetary policy meeting showed policymakers were divided on how soon to hike rates.
The 20-year JGB yield remained flat at 1.835%, while the 30-year yield rose 0.5 bp to 2.25%.
The two-year yield was unchanged at 0.495%, and the five-year yield edged up 1 bp to 0.65%, its highest since Aug. 1.