Japan’s 10-year bond yield hits 16-year high amid weak auction, rate-hike bets

TOKYO, March 10 – Japanese government bond yields climbed to multi-year highs on Monday, with the 10-year bond yield hitting a more than 16-year peak, after weak results at an auction for five-year bonds.

Market participants also awaited results of spring wage negotiations amid bets for additional interest rate hikes.

The 10-year JGB yield rose to a level last seen in October 2008 at 1.57%, along with the five-year yield , up 4 basis points at 1.16%. Benchmark 10-year JGB futures slid 0.38 points to 138.24 yen.

The bid-to-cover ratio at the sale of five-year bonds was the lowest since June 2022 at 3.17, down from 3.52 in February. The ratio is a common measure at auctions where a large number indicates higher demand.

Market focus is on the results of spring wage negotiations expected sometime on Friday, which could help the Bank of Japan raise interest rates more aggressively than previously expected if it confirms significantly strong momentum in wage growth.

However, global uncertainties loom amid trade tensions and concerns over the outlook for U.S. economic growth.

While some market participants are betting on another BOJ rate hike as soon as May, the central bank will likely take more time to assess the situation and impact on financial markets, “unless inflation and wage data should come in especially ‘hot’,” Morgan Stanley MUFG strategists said in a note.

Given the environment, market reaction to sizeable pay increases “is more likely to take the form of an upward repricing of the terminal policy rate level than an increase in positioning for the next normalisation move coming sooner rather than later,” macro strategist Koichi Sugisaki and his team said.

The two-year JGB yield ticked up 2 bps to a more than 16-year peak of 0.865%. The 20-year JGB yield climbed 2.5 bps to 2.27%, the highest since July 2008, while the 30-year JGB yield rose to 2.555%, the highest since June 2008.

This article was generated from an automated news agency feed without modifications to text.