Japan's 10-year bond yield falls as caution for BOJ's policy change remains weak

BY Reuters | ECONOMIC | 06/07/23 12:37 AM EDT

TOKYO, June 7 (Reuters) - Japanese government bond yields fell on Wednesday, in the run up to the Bank of Japan's (BOJ) policy at its meeting next week, as fewer people expect the central bank to tweak its ultra-loose policy.

The 10-year JGB yield fell 1 basis point (bp) to 0.410%, its lowest since June 2. The 20-year JGB yield fell 1.5 bps to 1.000%.

"Caution for the BOJ's policy tweak is weak," said Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"The yield will trade around the current level, which is slightly higher than 0.4% for a time being."

The BOJs two-day policy meeting starts Thursday next week.

Expectations for the BOJ to tweak its ultra-loose policy have receded, as governor Kazuo Ueda repeatedly said the central bank will continue monetary easing until inflation will sustainably hit its 2% target.

The 30-year JGB yield fell 1.5 bps to 1.240%.

The 40-year JGB yield was flat at 1.435%.

The five-year yield fell 0.5 bp to 0.075%.

The two-year JGB yield rose 0.5 bp to -0.065%.

Benchmark 10-year JGB futures rose 0.08 yen to 148.85 (Reporting by Tokyo markets team; Editing by Nivedita Bhattacharjee)

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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