On Tuesday, Japan’s 10-year government bond yield attained its highest level in more than nine years. The move is significant to the central bank’s recent market intervention in response to a comparable situation earlier this month. The 10-year yield of the Japanese Government Bond (JGB) climbed by 1 basis point, touching 0.660%, a value not witnessed since January 2014. This escalation followed the upward trend of U.S. yields, mirroring its movement.
Japan’s 10-year yield crosses the BOJ intervention level
The surge in yield led to speculation, raising the possibility that the Bank of Japan (BOJ) could resort to emergency purchases, which might lead to a depreciation in the yen’s value. Nonetheless, the central bank had not issued any official statement regarding implementing such a strategy.
The increase in yield was a direct response to the overnight escalation in the U.S. Treasury yields. Notably, this transition occurred organized and was not primarily driven by speculation, clarifying the Bank of Japan’s (BOJ) choice to refrain from intervention. Naoya Hasegawa, a senior bond strategist at Okasan Securities, emphasized this, stating that the BOJ’s lack of action was attributed to the well-structured nature of the yield movement.
On August 3, the BOJ engaged in unscheduled bond purchasing when the 10-year yield had reached 0.655%. That marked the second instance of emergency buying in that particular week.
On Monday, the yield on 10-year U.S. Treasury notes attained a point that hadn’t been seen since the onset of the Great Financial Crisis in 2007. The increase was driven by a growing agreement that the Federal Reserve would choose to keep interest rates elevated for a prolonged period, considering the strength of the U.S. economy.
Concurrently, Japan’s yields exhibited an upward trend across various timeframes. The five-year yield, for instance, experienced a 1 basis point uptick, reaching 0.235%, marking its highest point since February 24.
Similarly, the 20-year Japanese Government Bond (JGB) yields advanced to 1.4%, attaining its highest position since January 13. It corrected to settle at 1.395%, signifying a rise of 1.5 basis points from the previous session. This increase in the 20-year yield was attributed to lingering concerns among investors stemming from the lackluster results of an auction held in the previous week, as explained by Hasegawa.
Similarly, the 30-year JGB yield experienced an increase of 1.5 basis points, reaching 1.670%. In contrast, the two-year JGB yield remained stable at 0.025%.
