Japanese Government Bond yields rise, tracking US Treasury yields

JGB yields rise: Japanese government bond (JGB) yields experienced an upward trend on Wednesday, mirroring the movement of US Treasury yields ahead of the Federal Reserve's anticipated policy meeting conclusion later in the day.

The yen maintained stability at 157.87 per dollar after two days of volatile trading, during which it briefly dipped below 160 for the first time in 34 years before rebounding to 154.40. Analysts speculate that these fluctuations may have been influenced by Japanese authorities intervening in the currency market.

As of 0543 GMT on Wednesday, the 10-year JGB yield rose by 2 basis points to 0.89 per cent, recovering from previous losses. This rebound followed a decline to 0.865 per cent the previous day, which occurred as US yields dipped during Japan's national holiday on Monday.

In contrast, the 10-year Treasury yield remained relatively stable at 4.6862 per cent after a 7 basis point increase on Tuesday, prompted by strong labour market data, intensifying pressure on the Fed to delay rate cuts.

Market attention is now directed towards Chair Jerome Powell's post-meeting news conference, where his remarks are anticipated to maintain a hawkish stance in light of robust economic indicators and persistent inflationary pressures.

While Japanese bond yields recently reached a six-month high of 0.93 per cent, they retreated following the Bank of Japan's decision to maintain existing policy settings, including monthly JGB purchases.

According to Norihiro Yamaguchi, a senior economist at Oxford Economics, Japanese bond investors are currently reliant on US market cues due to limited domestic drivers. Yamaguchi predicts that the BOJ will not taper bond purchases until the final quarter of 2024, following a projected rate hike in September.

In bond markets, the two-year JGB yield rose by 1.5 basis points to 0.285 per cent, while the five-year yield increased by 2 basis points to 0.490 per cent. Similarly, the 20-year and 30-year yields advanced by 2.5 and 3.5 basis points, respectively.

Benchmark 10-year JGB futures fell by 0.2 yen to 144.3, with yields inversely correlating with bond prices.

(with Reuters inputs)