In anticipation of two JGB auctions later this week and another U.S. inflation report later in the week, Japanese government bond (JGB) rates increased on Monday, matching increases in Treasury yields.
After the markets were closed for Thanksgiving the day before, U.S. Treasury rates increased slightly on Friday during a half-session. Investor confidence that the Federal Reserve may start reducing interest rates earlier than anticipated has recently waned as economic data continues to show a robust economy despite higher inflation.
During Asian trading hours, the benchmark 10-year U.S. Treasury yield was last seen at 4.5%.
JGBs followed suit, with Japan’s 10-year yield slightly rising at 0.78% after hitting a low of 0.69% on Tuesday, the first day of September.
The focus of the market is on a new U.S. PCE reading on Wednesday. Takeshi Ishida, a strategist at Resona Holdings, stated that if the report indicates further slowing in domestic inflation, this might drive down U.S. Treasury rates and JGB yields as well.
Although he acknowledged that there was a “sense that (Japan’s) yields fell too much last week,” he also noted that any decline in JGB rates should be largely limited given that the Fed and the Bank of Japan (BOJ) are at different points in the rate hiking cycle.
Over 50% of Reuters’ surveyed analysts predicted that the BOJ will make a change at its April meeting, signalling the beginning of the institution’s withdrawal from its very loose monetary policy sometime in the upcoming year.
With 1.5 basis points (bps) gain, the yield on the 20-year JGB was 1.505%.
At 1.705%, the 30-year JGB yield increased by 2.5 basis points.
The last time the 40-year JGB yield was not traded was before to the bond’s auction on Tuesday.
On Thursday, there will also be an auction for the two-year note. At 0.060%, the two-year JGB yield remained unchanged.
Ishida stated that both auctions ought to proceed without any major issues.