TOKYO: Japanese government bond (JGB) yields rose on Friday, tracking US Treasury yields higher, while expectations for the Bank of Japan’s (BOJ) policy tightening loomed as the local currency weakened.
The 10-year JGB yield rose to as high as 0.975%, its highest level since Aug. 2, and was last up 1 basis point (bp) at 0.97%.
The 10-year US Treasury yields climbed on Thursday after data pointed to an economy on solid footing, easing market expectations for Federal Reserve aggressiveness in cutting interest rates.
“JGB yields will follow US yields as the market struggles to find domestic catalysts until the Oct. 27 election,” said Miki Den, senior Japan rate strategist at SMBC Nikko Securities.
The expectations for the BOJ’s interest increase loomed as the yen weakened, said Den.
Japan’s new prime minister Shigeru Ishiba has called a general election on Oct. 27.
Japanese yen fell to 150 yen against the US dollar for the first time since Aug. 1 overnight after data showed US retail sales rose in September.
A weaker local currency raises import costs, which raises prices in Japan.
Data showed on Friday Japan’s core consumer price index(CPI), which includes oil products but excludes fresh food prices, rose 2.4% in September from a year earlier, compared with a median market forecast for a 2.3% gain.
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The two-year JGB yield rose 0.5 bp to 0.435% and the five-year yield rose 0.5 bp to 0.59%.
The 20-year JGB yield rose 2 bps to 1.755%.
The 30-year JGB yield rose 1.5 bps to 2.15% and the 40-year JGB yield rose 0.5 bp to 2.435%.
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