Japan’s 10-year bond yield reaches highest since June 2009

JAPAN’S 10-year government bond yield reaches its highest since June 2009 at 1.5 per cent as German bunds suffered their worst sell-off since the months following the fall of the Berlin Wall.

The yield on Japan’s 10-year note is up 6.5 basis points, while government bond futures are down 64 ticks. Forty-year yields jumped 10 basis points to 2.845 per cent, the highest since its inception in 2007. This comes as the 10-year German bund yield soared as much as 31bps, which helped drive up yields globally.

The moves in German debt are due to a dramatic change in the country’s spending plans for defence and infrastructure investments.

Japanese yields are also rising as investors speculate that the Bank of Japan will continue to hike rates, with deputy governor Shinichi Uchida signalling that the benchmark interest rate remains on a gradual upward path in his speech on Wednesday (Mar 5). Caution surrounding the 30-year bond auction later Thursday is also weighing on bonds.

“Investors may not have expected developments to this extent in Germany, and they will need to reconstruct their views going forward,” said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management. “The impact of the large rise in German yields yesterday was very strong, and US government bonds were also sold, so there is a sense of caution about the 30-year bond auction today.” BLOOMBERG