JGBs edge down, pressured by US Treasuries

03-Dec-2016 Intellasia | Reuters | 6:00 AM Print This Post

Japanese government bonds were mostly lowers on Friday, pressured by an overnight drop in US Treasury prices.

The 10-year JGB yield rose half a basis point (bp) to 0.035 percent, after earlier rising as high as 0.045 percent, which matched a nine-month high notched last week. The 20-year yield added 1 bp to 0.480 percent.

Shorter maturities managed to eke out gains, with the two-year yield losing 0.5 bp to minus 0.180 percent while the five-year yield inched 0.5 bp lower to minus 0.105 percent.

December 10-year JGB futures ended down 0.02 point at 150.48.

On Thursday, US Treasury yields surged, with benchmark 10-year yields touching their highest levels since June 11, 2015 on expectations that gains in oil prices and US President-elect Donald Trump’s policies would fuel higher inflation.

The yield on 10-year Treasuries rose as high as 2.4920 percent, and stood at 2.433 percent in Asian trading on Friday.

Under its monetary framework outlined in September, the Bank of Japan controls the JGB yield curve and guides the benchmark yield to around zero percent.

But this framework of keeping the 10-year yield near zero is not economically reasonable because this level discourages lending, former central bank policymaker Sayuri Shirai said on Friday at a Breakingviews seminar hosted by Reuters.

The BOJ may have to allow 10-year yields to rise to anywhere from 0.5 percent to 1 percent next year if inflation starts to pick up, Shirai said.

Japan is preparing to issue more debt-covering bonds due to a likely shortfall in tax revenues for this fiscal year to March, the Nikkei business daily reported on Friday.



Category: Japan

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