JGBs hold steady as investors weigh inflation, central bank signals
TLT•Bank of Japan tightening stance remains in focus
Domestically, investors continued to monitor the Bank of Japan's tightening stance. A central bank official signalled on Thursday that further rate hikes could be needed to address inflation risks, and household surveys showed a sharp rise in price expectations.
- The 30-year yield JP30YTN=JBTC sank 1 bp to 3.820%.
- The two-year yield JP2YTN=JBTC, the one most sensitive to BOJ policy rates, was unchanged at 1.425%, while the five-year yield JP5YTN=JBTC fell 0.5 bp to 1.945%.
Longer-dated yields ease after strong demand at auction
- The 10-year JGB yield JP10YTN=JBTC added 0.5 basis point (bp) to 2.715%. Yields move inversely to bond prices.
- The 20-year yield JP20YTN=JBTC eased 0.5 bp to 3.585%, on course for a 16-bp slide this week, the steepest weekly drop in more than a year following surprisingly strong demand at a sale of the debt on Tuesday.
- U.S. Treasury and euro-zone yields moved modestly higher overnight, as steady U.S. economic data, along with higher oil prices tied to Gulf tensions, reinforced expectations for further central bank tightening.
- "Crude oil prices continue to fluctuate, and inflation outlooks and interest rate trends remain highly susceptible to the influence of the energy market," Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.
- "The market remains mindful of the uncertainty surrounding fiscal management and monetary policy, and there is persistent wariness regarding the risk of rising interest rates, including in the ultra-long-term segment," he added.
