On October 30, 2023, Japanese government bond (JGB) yields surged, with the 10-year JGB yield hitting its highest level since June 2009, crossing the 1.5% mark. The 30-year bonds also saw significant increases, surpassing 2.5% for the first time since 2008. The rise in JGB yields was driven by global bond market pressures and informed commentary from experts, including Masahiko Loo from State Street Global Advisors, who noted that the dynamics of supply and demand in the JGB market were unfavorable.
The U.S. 10-year Treasury yield also rose, reflecting similar trends in global yields, particularly due to expectations of increased fiscal spending in the EU and Germany, where 10-year bond yields reached 2.8%. Additionally, comments from the Bank of Japan’s Deputy Governor Uchida hinted at a potential acceleration in interest rate hikes, which further influenced the bond market.
Japan’s inflation has exceeded the Bank of Japan’s target for over 34 consecutive months, with the most recent figures indicating a spike to a two-year high of 4%. This sustained inflation pressure is likely to lead to further rate hikes by the BOJ, contributing to the rise in bond yields. Overall, market sentiment is cautious as investors, particularly domestic banks, remain wary amid these developments.
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