Japan’s 10-year bond yield hits decade-high amid BOJ policy bets

JAPAN’S benchmark government bond yield climbed to highest since 2013 amid expectations that the Bank of Japan (BOJ) is committed to normalising interest rates and supporting the struggling yen.

The yield on 10-year government debt rose 2.5 basis points to 0.975 per cent on Monday (May 20). When yields were last this high, then-newly appointed BOJ governor Haruhiko Kuroda was just starting his radical monetary easing that caused the benchmark yield to drop to negative levels in the following years.

Now, after his successor Kazuo Ueda lifted rates for the first time since 2007 in March, yields are creeping higher. Yields on debt due in 20 to 30 years recently climbed to the highest in a decade, which is encouraging Japanese investors to put more of their funds into the domestic debt market.

Investors are scouring data and policymaker statements to try to predict the BOJ’s next move. Pacific Investment Management sees the prospect of three more moves this year. Vanguard Group’s head of international rates Ales Koutny expects hikes to around 0.75 per cent by the end of the year. BLOOMBERG