Japan’s benchmark government bond yield rose to the upper end of the trading range tolerated by its central bank, as debt markets worldwide came under pressure on expectations for continued monetary tightening.
(Bloomberg) — Japan’s benchmark government bond yield rose to the upper end of the trading range tolerated by its central bank, as debt markets worldwide came under pressure on expectations for continued monetary tightening.
The 10-year yield rose to 0.25% for the first time since June 17, when hedge funds were launching attacks on the bond, betting the Bank of Japan would have to tweak its easy policy amid a global upward trend in yields. There are signs of similar wagers creeping back, though not to the same degree seen earlier this summer.
Earlier, the BOJ boosted bond purchases, saying it would buy 550 billion yen ($3.8 billion) of five-to-10 year debt at its regular operations, up from 500 billion yen scheduled. It carried out a similar operation last week.
“So far, JGB markets are reacting calmly without any sense of selling intensifying related to a BOJ policy tweak even as the yen slumps, unlike in June,” said Katsutoshi Inadome, a strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “The BOJ could make additional purchase operations if yields keep rising.”
Heavy selling pressure in June eased only when unprecedented BOJ buying dragged benchmark yields back below the 0.25% ceiling. BOJ Governor Haruhiko Kuroda has emphasized his determination to stick with rock-bottom interest rates even as global peers hike to tackle accelerating inflation.
Yen Eyes a Break of 145 as Verbal Intervention Intensifies
Treasury yields jumped on Tuesday after US consumer prices exceeded forecasts last month, boosting speculation on another super-sized Federal Reserve rate hike. The yen fell toward the closely-watched 145 level against the dollar, sparking further verbal intervention from Japanese officials.
(Updates with analyst comment.)
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