US, JGB yields rise on likely Fed pause

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NEW YORK- US Treasury yields edged higher on Friday, coming off earlier highs that were fueled by data showing retail sales rose more than expected last month and import prices increased in the world’s largest economy.

The reports increased the possibility that the Federal Reserve could pause cutting interest rates at next month’s policy meeting.

The benchmark 10-year yield inched 1 basis point (bp) to 4.429 percent It hit 4.505 percent earlier in the session, a 5-1/2-month high, in the wake of strong economic data. On the week, the 10-year yield gained 12 bps.

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US two-year yields, which reflect interest rate expectations, were slightly up at 4.305 percent rising to 4.379 percent earlier, the strongest level since late July. The yield was up 4.9 bps for the week.

Japanese government bond (JGB) yields rose on Friday, as a weak yen raised bets for a Bank of Japan rate hike, while a hawkish turn by the US Federal Reserve chief hurt sentiment.

The 10-year JGB yield touched 1.08 percent, its highest level since July 25, and was last up 1.5 basis points (bps) at 1.075 percent.

The five-year yield rose 1.5 bps to 0.705 percent, hovering near its highest level since November 2009, despite firm demand at an auction for bonds of the same maturity.

“Market sentiment was weak, as the weaker yen boosted bets for a BOJ rate hike, while (Fed Chair Jerome) Powell’s comments also weighed,” said Miki Den, senior Japan rate strategist at SMBC Nikko Securities. Overnight Index Swap (OIS) rates indicated a 54.45 percent chance of the BOJ raising rates to 0.5 percent in December.  

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