TOKYO, May 29 (Reuters) – Japanese government bond (JGB)
yields rose on Wednesday to fresh multi-year highs as investors
remained cautious of further tightening by the Bank of Japan
(BOJ), with a central bank board member saying it could raise
rates if sharp yen falls affect inflation.
The 10-year JGB yield rose 3.5 basis points
(bps) to 1.070%, its highest since December 2011.
The two-year JGB yield, which tends to be more
sensitive to monetary policy expectations, rose 2 bps to a fresh
15-year high of 0.365%.
The market was paying close attention to the yen as it again
inched lower despite bouts of suspected interventions from Tokyo
at the end of April and early May.
“Along with putting the market on alert for currency
intervention, the weak yen heightens expectations for BOJ policy
adjustments,” with many investors eyeing July for another hike,
Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust
Asset Management said.
JGB yields have steadily climbed to their highest in more
than a decade in recent weeks, after the BOJ dropped hawkish
signals and unexpectedly made cuts to its offer of bond purchase
earlier this month.
The cut has led many in the market to suspect the central
bank seeks to slow the yen’s depreciation and has prompted
expectations for a full-fledged tapering of the BOJ’s bond
purchases at its June meeting.
BOJ board member Seiji Adachi said on Wednesday the central
bank may raise interest rates if sharp falls in the yen boost
inflation or the public’s perception of future prices move more
than expected.
JGB yields also got a boost from their U.S. peers, which
rose to multi-week highs in overnight trading.
The five-year yield jumped 3 bps to 0.620%,
its highest since February 2011.
The 20-year JGB yield leapt 3.5 bps to
1.890%, a level last seen in July 2011.
The 30-year JGB yield was up 4 bps at a
13-year peak of 2.225%.
(Reporting by Brigid Riley; Editing by Mrigank Dhaniwala)
