JGB yields rise on caution over July rate hike

Analysts say the market is still split on the chance of another rate hike at the BoJ’s July 30-31 meeting. — Reuters

TOKYO: Japanese government bond (JGB) yields rose yesterday, as investors adjusted positions on heightened concerns that the Bank of Japan (BoJ) could raise interest rates again later this month.

On Wednesday, Japan’s Digital Minister Taro Kono said in an interview with Bloomberg that the BoJ needs to raise rates to support the yen, generating fresh caution about the chance of a July rate hike.

The benchmark 10-year JGB yield was last up 2.5 basis points (bps) at 1.055%, while 10-year JGB futures fell 0.2 yen to 143.02 yen yesterday.

The two-year JGB yield, which corresponds more closely to monetary policy expectations, rose two bps to 0.34%.

Analysts say the market is still split on the chance of another rate hike at the BoJ’s July 30-31 meeting, where the central bank has said it will unveil its JGB purchase tapering plans.

“The market appears to be only half-convinced, so rather than fully pricing in a July hike, it’s more like investors have to be aware of that possibility,” said Keisuke Tsuruta, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.

Rather than continuing to push JGB yields higher on rate hike bets, investors appear to be selling bonds to adjust positions after yields declined at the end of last week, he said.

Yields move inversely to bond prices. — Reuters