JGB Yields Track US Peers Higher Ahead of Bond Auctions, US Inflation Data

Reuters

15:42 JST, November 27, 2023

TOKYO (Reuters) – Japanese government bond (JGB) yields rose on Monday, mirroring Treasury yields ahead of another U.S. inflation reading and two auctions for JGBs later in the week.

U.S. Treasury yields ticked up on Friday during a half-session after markets were closed the previous day for Thanksgiving. Recent optimism among investors that the Federal Reserve could begin cutting interest rates sooner than expected wavered as economic data continued to point to a resilient economy despite stickier inflation.

The benchmark 10-year U.S. Treasury yield last hovered around 4.5% during Asian trading hours.

JGBs followed suit, with Japan’s 10-year yield up marginally at 0.78% after falling to its lowest since early September last Tuesday at 0.69%.

Market attention is on another U.S. PCE reading on Wednesday, which could push U.S. Treasury yields down again – and JGB yields in turn – if the data shows more slowing in domestic inflation, said Takeshi Ishida, a strategist at Resona Holdings.

However, given that the Bank of Japan (BOJ) and the Fed are at opposite ends of the rate hike cycle and a “sense that (Japan’s) yields fell too much last week,” any drop in JGB yields should be relatively contained near the current range, he said.

The BOJ is expected to begin exiting from its ultra-loose monetary policy sometime next year, with more than half of the economists polled by Reuters expecting a move at its April meeting.

The 20-year JGB yield JP20YTN=JBTC rose 1.5 basis points (bps) to 1.505%.

The 30-year JGB yield JP30YTN=JBTC was up 2.5 bps at 1.705%.

The 40-year JGB yield JP40YTN=JBTC was last untraded ahead of an auction for the bond on Tuesday.

An auction will also be held for the two-year note on Thursday. The two-year JGB yield JP2YTN=JBTC held flat at 0.060%.

Both auctions should pass without much of a fuss, said Ishida.