JGB yields jump as inflation worries resurface
A Japan Yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White/Illustration
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TOKYO, Sept 24 : Japanese government bond yields jumped on Thursday on renewed concerns about inflation even after the Bank of Japan raised its policy rate to a 31-year high last week.
The 10-year JGB yield rose 10 basis points (bps) to 3.075 per cent, its highest since August 1996. The five-year yield rose 10 bps to a record high of 2.375 per cent.
The selloff in bonds reflected a global market rout, domestic inflation worries and signals from BOJ Governor Kazuo Ueda that further rate hikes lie ahead, leaving markets concerned the central bank may still be behind the curve. Yields move inversely to bond prices.
“Interest rates are being reviewed globally, and Japan’s interest rates are particularly low,” said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management.
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“So when the market finds a negative market cue, the selloff accelerates,” he added.
Japan’s yields rose across the curve on Thursday, the first trading day after the BOJ raised its policy rate to 1.25 per cent from 1 per cent on Friday. Japan’s markets were closed through Wednesday due to public holidays.
Ueda signalled further rate hikes after the policy meeting, but the yen weakened, prompting Japanese authorities to conduct rate checks in the currency market several hours after the BOJ’s decision.
On Wednesday, US Treasury yields jumped in their sharpest daily increase since the Liberation Day market rout last year, after a strongr-than-expected purchasing managers’ report ignitede fresh inflation fears and an auction of five-year notes was poorly received.
The dollar rallied to its highest in nearly two months on Wednesday, on growing expectations of a near-term Federal Reserve rate hike. A weaker yen increases import costs, pushing domestic prices higher.
Local media reports about Economic Minister Minoru Kiuchi seeking advice from reflationist economists in crafting the economic blueprint boosted worries that the central bank would be behind the curve in coping with rising prices, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.
Prime Minister Sanae Takaichi’s first economic blueprint, compiled in July and focused on economic growth, jolted markets and sent bond yields soaring.
The selloff of super long bonds eased earlier this month as bets on BOJ rate hikes at a faster pace grew.
On Thursday, the 20-year JGB yield jumped 8 bps to 3.900 per cent. The 30-year yield rose 6 bps to 4.130 per cent.
Source: Reuters
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