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JGB 10-year yield hits six-year high as global tightening pressures weigh on BOJ

By on January 31, 2022 0

TOKYO, Jan 31 (Reuters) – Yields on Japan’s benchmark 10-year government bonds climbed on Monday to their highest level since the Bank of Japan‘s negative interest rate policy began six years ago. years, as investors wondered whether the central bank would be swayed by policy tightening in the United States and elsewhere.

The 10-year JGB yield hit 0.185% for the first time since January 29, 2016, before closing 0.5 basis points higher at 0.170%. The BOJ’s yield curve control policy sets the benchmark rate within a range of 25 basis points on either side of zero.

The benchmark JGB 10-year futures index fell 0.05 points to 150.72, with trading volume of 22,528 lots.

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Yields rose globally as central banks from Washington, DC to Wellington, New Zealand pursue more hawkish paths to policy normalization amid stubbornly high inflation, even as the BOJ reiterated its commitment to ultra-accommodative monetary conditions.

“There is a part of the market that seems to think that the BOJ will not be able to ignore the change in global (monetary policy) conditions,” said Chotaro Morita, head of Japanese rates strategy at SMBC Nikko Securities.

The 20-year JGB yield jumped to 0.570% for the first time since Feb. 26, before ending the day 1 basis point higher at 0.560%.

The 30-year JGB yield rose 2 basis points to 0.775%, a level not seen since December 2018.

The two-year JGB yield ended at minus 0.055% after hitting minus 0.050% for a second day in a row, which was also the highest since January 2016.

The five-year yield ended flat at minus 0.020%. It hit a six-year high of minus 0.010% on Thursday.

“As BOJ Governor (Haruhiko) Kuroda continues to deny a possible policy change in the near future, the JGB market is getting nervous,” Tohru Sasaki, head of Japanese markets research at JPMorgan, wrote in a rating.

Ahead of a stimulus exit, the BOJ is likely to shift its yield curve control target from the 10-year JGB to the five-year JGB, he said, noting the rise in the five-year yield toward zero. this month.

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Reporting by Kevin Buckland; Additional Reports from the Tokyo Markets Team; Editing by Subhranshu Sahu

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