JGB yields rise as market awaits BOJ meeting next week

BY Reuters | ECONOMIC | 06/07/24 12:43 AM EDT

By Brigid Riley

TOKYO, June 7 (Reuters) - Japanese government bond (JGB) yields rose on Friday, as investor focus shifted to whether the Bank of Japan (BOJ) will announce a tapering of its bond purchases next week.

Yields have fallen from more than a decade peaks this week, tracking a decline in U.S. Treasury yields.

Firm demand at an auction for 30-year JGBs on Thursday added downward pressure on yields, but the market broke the trend on Friday, with yields rising across the curve.

The benchmark 10-year yield rose 2.5 basis points (bps) to 0.98%, while 10-year futures fell 0.28 yen to 143.87 yen.

The two-year yield, which is more sensitive to monetary policy expectations, also ticked up 2.5 bps to 0.355%.

The upward move largely appeared to be a rebound after a significant decline in the previous session, with investors still cautious ahead of the BOJ's meeting on June 13-14, said Yurie Suzuki, a market analyst at Mizuho Securities.

"It's not as if market expectations regarding BOJ policy such as those for additional rate hikes in the future have lessened, so I believe that's connected to the sell-off," she added.

Yields move inversely to bond prices, rising as bonds are sold and prices fall.

Many market players anticipate the central bank could begin a full-fledged tapering of bond purchases at its June meeting, following an unexpected cut to a segment of the BOJ's offer amounts on May 13 and a hawkish turn in policymakers' comments.

Expectations have also grown for another rate hike as soon as July.

The BOJ left its offer amounts unchanged at a bond-buying operation in the Asian morning, although analysts said that's had little effect on today's market moves.

The five-year yield climbed 3 bps to 0.57%.

The 20-year yield was 2.5 bps higher at 1.78%, while the 30-year yield edged up 1.5 bps to 2.1%. (Reporting by Brigid Riley; Editing by Varun H K)

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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