Japanese bonds track Treasury rally; BOJ rate hike bets solidify
TLT•Japanese bonds rise as Treasury rally lifts sentiment
TOKYO, Aug. 14 (Reuters) - Japanese government bonds rose on Friday, sending shorter-term yields down from historic highs, tracking a rally in U.S. Treasuries, even as expectations firmed around a Bank of Japan rate hike next month.
Here are a few details:
- The benchmark 10-year JGB yield JP10YTN=JBTC fell 1.5 basis points to 2.855%, trimming a weekly gain. Yields move inversely to bond prices.
- U.S. Treasury yields fell across the curve on Thursday after tame producer price data cooled expectations for a Federal Reserve rate hike next month.
- "Following the decline in U.S. Treasury yields and the drop in crude oil prices, conditions appear favourable for buying domestic bonds," Takayuki Miyajima, senior economist at Sony Financial Group, said in a note. "On the other hand, speculation about an early interest rate hike by the Bank of Japan continues to weigh on the market."
- Data on Thursday showed Japan's July producer price index rose 7.2% year-on-year, slightly below forecasts but still elevated enough to reinforce expectations for a rate hike.
- Japan may signal the chance of faster-than-expected interest rate increases to stem the yen's decline, Tokyo's former top currency diplomat Mitsuhiro Furusawa told Reuters.
- The two-year yield JP2YTN=JBTC, the one most sensitive to BOJ policy rates, slid 0.5 bp to 1.64%, down from a 31-year high reached on Thursday.
- The five-year JGB yield JP5YTN=JBTC was flat at 2.12% after reaching a record 2.125% in the previous session.
