TOKYO: Japan’s 10-year government bond yield hit a 12-year high on Tuesday as the market braced for further tightening by the Bank of Japan, following a senior official’s hawkish comments.
The 10-year JGB yield rose 1.5 basis points (bps) to 1.035%, its highest since April 2012.
On Monday, BOJ Deputy Governor Shinichi Uchida said the end of Japan’s battle against persistent deflation is in sight and that labour market conditions have changed structurally and irreversibly.
“Overall, his remarks were optimistic about the outlook of Japan’s inflation, which suggested the normalization of the BOJ’s policy is imminent,” said Naoya Hasegawa, chief bond strategist at Okasan Securities.
This month, JGB yields have risen due to hawkish hints from the central bank, including an abrupt cut in the amounts for its regular bond buying, as it seeks to contain the yen’s depreciation. Sentiment was hurt also by a weak auction of the 350 billion yen ($2.23 billion) of 10-year climate transition bonds.
The highest accepted yield was 1.04%, a discount over the regular 10-year JGB yield.
“With uncertainties about the policy decision until the BOJ’s meeting next month, it was difficult for investors to be aggressive on the climate transition bonds,” Hasegawa said.
Japan’s 10-year bond yield hits 3-month high amid BOJ policy shift bets
Climate transition bonds are a new class of bonds which aim to fund the development of clean energy resources, such as low-cost wind power generators and are expected to enjoy premium over regular bonds.
Yields on other tenors were mixed, with the two-year JGB yield inching up 0.5 bp to 0.35%, while the five-year yield fell 0.5 bp to 0.590%.
The 20-year JGB yield fell 0.5 bp 1.855%. The 30-year JGB yield rose 1.5 bps to 2.185%.
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