JGB yields track US peers higher ahead of bond auctions, US inflation data

BY Reuters | TREASURY | 11/26/23 10:54 PM EST

By Brigid Riley

TOKYO, Nov 27 (Reuters) - Japanese government bond (JGB) yields rose on Monday, mirroring Treasury yields ahead of another U.S. inflation reading and two auctions for JGBs later in the week.

U.S. Treasury yields ticked up on Friday during a half-session after markets were closed the previous day for Thanksgiving. Recent optimism among investors that the Federal Reserve could begin cutting interest rates sooner than expected wavered as economic data continued to point to a resilient economy despite stickier inflation.

The benchmark 10-year U.S. Treasury yield last hovered around 4.5% during Asian trading hours.

JGBs followed suit, with Japan's 10-year yield up marginally at 0.78% after falling to its lowest since early September last Tuesday at 0.69%.

Market attention is on another U.S. PCE reading on Wednesday, which could push U.S. Treasury yields down again - and JGB yields in turn - if the data shows more slowing in domestic inflation, said Takeshi Ishida, a strategist at Resona Holdings.

However, given that the Bank of Japan (BOJ) and the Fed are at opposite ends of the rate hike cycle and a "sense that (Japan's) yields fell too much last week," any drop in JGB yields should be relatively contained near the current range, he said.

The BOJ is expected to begin exiting from its ultra-loose monetary policy sometime next year, with more than half of the economists polled by Reuters expecting a move at its April meeting.

The 20-year JGB yield rose 1.5 basis points (bps) to 1.505%.

The 30-year JGB yield was up 2.5 bps at 1.705%.

The 40-year JGB yield was last untraded ahead of an auction for the bond on Tuesday.

An auction will also be held for the two-year note on Thursday. The two-year JGB yield held flat at 0.060%.

Both auctions should pass without much of a fuss, said Ishida.

(Reporting by Brigid Riley; Editing by Mrigank Dhaniwala)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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