Japan's super-long bond yields rise after speculation swirls over new Fed chair

Japan's super-long bond yields changed course and rose in ⁠late afternoon trade on Friday, following speculation that President Donald Trump would nominate former Federal Reserve Governor Kevin Warsh to head the U.S. central ‌bank.

The 20-year ‌JGB yield rose 1 basis point (bp) to 3.170%, reversing earlier declines to as ‌low as 3.145%.

The 30-year yield inched up 0.5 bp to 3.625%.


"Investors might have reacted to media reports that Warch is going to be the Fed chairman," said Eiichiro Miura, senior general manager of investments at Nissay Asset Management.

"This could be an unwind of the ‌trade betting ‍on Rick Rieder, who is seen capping rises ‍in yields."

Yields on shorter-dated bonds held their ground, ‌with the two-year bond yield falling 2 bps to 1.23% after a strong bond auction.

Yields move inversely to bond prices.

The strong outcome of the auction reflected the market view that the current level of the two-year bond yield already priced in the Bank of Japan's ‍terminal rate, said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.

The benchmark ‍10-year JGB ⁠yield fell 1 ⁠bp to 2.24%.

Their yields fell because some investors bought back JGBs to cover their short positions after a heavy sell-off this month, said Kentaro Hatono, head of global fixed income at Asset Management One.

Yields surged mid-January after Prime Minister Sanae Takaichi called a snap election and pledged to cut sales taxes on food, raising fears of worsening fiscal conditions.