By Kevin Buckland
TOKYO- Japanese government bond yields fell on Thursday amid pressure from a steep slide in US bond yields overnight, as cooling core inflation reignited bets for a Federal Reserve interest rate cut by July.
However, rising bets for the Bank of Japan to raise rates at its meeting next week bolstered the yen and mitigated the decline in domestic yields.
The 10-year JGB yield fell 1 basis point to 1.24 percent, retreating from Wednesday’s peak of 1.255 percent, a level previously not seen since April 2011.
The benchmark yield had earlier fallen as low as 1.225 percent but pared the decline as the yen strengthened to a nearly one-month high of 155.21 per dollar
The 10-year US Treasury yield stood at 4.6612 percent on Thursday, after plunging as much as 15 bps to a one-week low of 4.6370 percent in the prior session.
Comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week opened the door to an imminent tightening of policy. Reuters and other media reported that a rate hike is likely on Jan. 24, barring a resurgence in market volatility after Donald Trump’s inauguration as US President.
“Although there is still elevated uncertainty around the Trump administration’s management of policy and the market’s reaction thereto, it appears that at least the BOJ’s stance on rate hikes has completely changed since December,” Barclays analysts wrote in a report, as they brought forward their call for the next BOJ hike to this month from March.
The five-year JGB yield fell 1 bp to 0.88 percent. —Reuters