JGB yields fall on hopes for slower Fed rate hike

YIELDS on super-long Japanese government bonds (JGBs) fell on Wednesday (Dec 14), tracking US Treasury yields lower, as lower than expected inflation data raised optimism for a slower pace of the Federal Reserve’s interest rate hikes.

The 30-year JGB yield fell 2 basis points to 1.380 per cent. The 20-year JGB yield fell 2 basis points to 1.065 per cent, despite an auction for bonds with the same maturity in the next session.

“The auction may receive rather weak or moderate outcome,” said Ataru Okumura, strategist at SMBC Nikko Securities.

“Investors have already taken possible rises in yields in the future as pressure for the Bank of Japan to alter its policy has been increasing.”

Yields on Japanese super-long notes were on the decline since their peak in October, but the pace has been slower than that of US Treasuries as investors bet that the Bank of Japan would tweak its ultra-rate policy.

Recently high profile officials, including a central bank board member Naoki Tamura, have voiced the need to review the bank’s monetary policy framework, including the yield curve control (YCC) policy, which guides the 10-year bond yield around 0 per cent.

The 40-year JGB yield fell 3 basis points to 1.580 per cent.

The 10-year JGB yield was flat at 0.250 per cent, the top of the central bank’s policy range.

The two-year JGBs did not trade and the yield was at -0.020 per cent. The five-year yield was flat at 0.125 per cent.

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Benchmark 10-year JGB futures rose 0.15 yen to 148.2, with a trading volume of 8,941 lots. AFP