Updated April 15th, 2024 at 11:58 IST

JGB yields retreat as Middle East tensions spur safe-haven demand

While the 2-year yield hit its highest level since 2009 on Friday, and the 5-year yield touched its highest since 2011, they both experienced a slight pullback.

Reported by: Business Desk
JGB | Image:Shutterstock
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JGB yields: Japanese government bond (JGB) yields experienced a decline on Monday as investors sought refuge in safe-haven assets amidst escalating tensions in the Middle East.

The 10-year JGB yield retreated by 1 basis point (bp) to 0.850 per cent as of approximately 0500 GMT, stepping back from the five-month high of 0.860 per cent recorded at the close of last week. This movement reflects the inverse relationship between bond yields and prices.

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Similarly, the two-year and five-year yields each lost 1 bp, settling at 0.265 per cent and 0.480 per cent, respectively. While the two-year yield hit its highest level since 2009 on Friday, and the five-year yield touched its highest since 2011, they both experienced a slight pullback in response to recent geopolitical tensions.

Conversely, longer-dated JGBs demonstrated more resilience, with the 20-year yield declining by 0.5 bp to 1.630 per cent, and the 30-year yield remaining flat at 1.910 per cent.

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Over the weekend, Iran launched an unprecedented direct attack on Israeli territory, heightening the potential for a broader regional conflict. In response, investors sought refuge in bonds, gold, and other safe-haven assets.

The recent rise in JGB yields was primarily influenced by increasing US Treasury yields, driven by robust consumer inflation data. However, traders recalibrated their expectations regarding the timing of the first rate cut by the Federal Reserve, leading to a reversal in bond market sentiment.

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Shoki Omori, Chief Japan Desk Strategist at Mizuho Securities, advised, "Considering the excessive influence of US interest rates and geopolitical risks from the Middle East, it is currently advisable to avoid JGBs in favor of a simple investment in three-month US dollar T-bills."

(With Reuters inputs.)

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Published April 15th, 2024 at 11:58 IST