JGB yields track US peers lower ahead of Powell speech

BY Reuters | ECONOMIC | 08/21/24 02:36 AM EDT

TOKYO, Aug 21 (Reuters) - Japanese government bond yields fell on Wednesday, tracking overnight declines in U.S. Treasury yields as markets awaited remarks by Federal Reserve Chair Jerome Powell later this week.

The 10-year JGB yield fell 1.5 basis points (bps) to 0.87% and the 20-year JGB yield also fell 1.5 bps to 1.715%.

U.S. Treasury yields sank on Tuesday, as the prospect of an interest rate cut next month loomed large ahead of the Kansas City Fed's Jackson Hole economic symposium on Friday.

Japanese yields tracked U.S. peer's declines but strategists say the current level of yields do not justify the Japanese central bank's tightening path.

"Given the prospects of the Bank of Japan's rate hike path, the current level of the five-year bond yield is low," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

Some 57% of economists said the BOJ will raise interest rates again by year-end, according to a Reuters poll published on Wednesday, with the median prediction for the rate at end-year was 25 basis points higher at 0.50%.

The five-year yield fell 2 bps to 0.475%.

The rate on the forward one-year Overnight Index Swap (OIS) maturing in August 2026 was at 0.4975%.

"It might be hard to price in the BOJ's rate hike at the moment as the yen has gained momentum against the dollar," said Hasegawa.

The U.S. currency dipped below the closely watched 145 yen level against the yen earlier in the session as the market awaited Powell's comments as well as preliminary revisions to U.S. labour data due later in the day.

The market focus is also on a special session of Japan's parliament on Friday, where the BOJ Governor Kazuo Ueda will discuss the BOJ's surprise rate hike last month.

The two-year JGB yield fell 0.5 bp to 0.35%.

The 30-year JGB yield fell 1.5 bps to 2.085%.

The 40-year JGB yield fell 0.5 bp to 2.34%. (Reporting by Junko Fujita; 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.

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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