Japan bond yields extend surge as inflation, BOJ rate-hike bets loom
TLT•Japanese government bond yields climbed to historic levels on Friday as a global bond selloff and expectations of further Bank of Japan rate hikes added pressure. The 10-year yield rose 4 basis points to 3.115%, its highest since August 1996, while the 5-year yield reached a record 2.405%.
1. Yields reach historic levels
The benchmark 10-year Japanese government bond yield rose 4 basis points to 3.115%, a level last seen in August 1996. The 5-year yield gained 3 basis points to a record 2.405%, while the 2-year yield rose 2 basis points to 1.92%, its highest since April 1995. The 40-year yield gained 5.5 basis points to 4.255%.
2. Rate pressures build
Japanese yields tracked a sharp rise in U.S. Treasury yields as firmer oil prices revived inflation concerns and investors priced in greater odds of a near-term Federal Reserve rate hike. The Bank of Japan raised its policy rate to 1.25% last week. Former BOJ board member Makoto Sakurai said the central bank could raise rates roughly once every three months toward 2% by around June next year.
3. Factors cited by analysts
Barclays Securities Japan analysts said expectations of rate hikes, persistent yen weakness, concerns over fiscal discipline and rising overseas rates were likely to continue driving yields higher.
