JGB yields jump after Fed’s slow rate cut signal lifts US Treasury peers

TOKYO, – Japanese government bond yields jumped on Thursday as investors awaited the Bank of Japan’s policy decision due later in the day, with a surge in U.S. Treasury yields overnight weighing on market sentiment.

The two-year JGB yield, most sensitive to the BOJ’s policy rate, jumped 3.5 basis points to 0.62%.

U.S. Treasury yields surged on Wednesday after the Federal Reserve lowered interest rates as widely expected, but flagged a slower pace of easing next year amid a persistently stable labour market and inflation that has become stickier than normal.

“The rises in JGB yields are unlikely to affect the BOJ’s decision later in the day, as the yen did not fall below the 155 per-dollar level overnight,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.

“The market expects the BOJ to keep rates steady later in the day, and its focus is on BOJ Governor Ueda’s comments on why the central bank did not raise rates this month.”

The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signalled its readiness to hike again if wages and prices move as projected.

JGB yields touched multi-year highs in November after Ueda’s comments about the economic outlook, which investors took as signs of a further policy shift.

Such bets receded after media reports that the central bank would go slow. Reuters reported that the BOJ may keep interest rates steady this month as policymakers want to spend more time scrutinising overseas risks and clues on next year’s wage outlook.

The 10-year JGB yield rose 3.5 bps to 1.095%. The five-year yield jumped 4.5 bps to 0.760%.

The 20-year JGB yield rose 2.5 bps to 1.895%.

This article was generated from an automated news agency feed without modifications to text.