JGB yields follow US peers lower

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By Brigid Riley

TOKYO- Japanese government bond (JGB) yields fell on Monday, tracking a decline in US Treasury yields at the end of last week, with investors assessing the outlook for further interest rate hikes in Japan this year.

The 10-year JGB yield was down 1.5 basis points (bps) at 1.215 percent, while 10-year JGB futures rose 0.2 points to 140.87 yen.

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On Friday, the Bank of Japan (BOJ) raised interest rates to their highest since the 2008 global financial crisis, a move that had been nearly fully priced by markets, and revised up its inflation forecasts.

Further scope for the 10-year JGB yield to rise will depend on market expectations regarding the pace and extent of future rate hikes, but BOJ Governor Kazuo Ueda said that will be based on how soon trend inflation sustainably hits the BOJ’s target.

Economists at Moody’s Analytics are among those who believe the next hike may come in six months but highlight that will depend on how the domestic and global outlook shapes up.

“The outlook is subject to significant policy uncertainty at home and abroad. US President Donald Trump has promised higher tariffs, which would doubtless shake up global trade and supply chains,” they wrote in a client note. —Reuters

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