JGB yields rise in line with U.S. peers amid BOJ policy tweak bets

BY Reuters | ECONOMIC | 02/07/23 12:57 AM EST

TOKYO, Feb 7 (Reuters) - Japanese government bond yields rose on Tuesday, tracking for any tweaks of the Bank a rise in U.S. Treasury yields overnight, while investors braced of Japan's ultra-low rate policy when the new governor takes a seat in April.

The 10-year JGB yield rose 0.5 basis point (bp) to 0.495%.

The 10-year JGB yield rose 0.5 bp to 0.495%, just below the BOJ's upper end of the policy band of 0.5%.

The 20-year JGB yield rose 0.5 bp to 1.315%.

"The view on the U.S monetary policy is becoming less optimistic," said Makoto Suzuki, a senior strategist at Okasan Securities.

Benchmark 10-year U.S. Treasury yields hit four-week highs overnight, after a blowout employment number raised expectations that the Federal Reserve's interest rate hikes will not end with a hard economic landing, and that the U.S. central bank may have more than one more rate increase left.

"In Japan, more investors agree that, depending on who becomes the governor, it is inevitable for the BOJ to tweak its monetary policy which has caused obvious market distortions."

The Japanese government is considering presenting to parliament its nominees for next BOJ governor and two deputy governors sometime next week.

The 30-year JGB yield rose 2 bps to 1.545% after an auction for the bonds with the same maturity witnessed a firm outcome.

The auction received bids worth 3.32 times the amount sold, higher than a ratio of 3.1 times at the previous auction.

The 40-year JGB yield rose 2.5 bps to 1.785%.

The two-year JGB yield rose 0.5 bp to -0.025%.

The five-year yield rose 1 bp to 0.175%.

Benchmark 10-year JGB futures fell 10 yen to 146.84, with a trading volume of 10,693 lots. (Reporting by Tokyo markets team; Editing by Rashmi Aich)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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