JGB yields rise as investors focus on 30-year auction, BOJ meeting

Japanese government bond (JGB) yields rose on Tuesday as investors extended a recent selloff across most tenors ahead of an expected rate hike by the central bank.

Here are a few details:

The benchmark 10-year JGB yield climbed 2.5 basis points (bps) to 2.740%, putting it on track for its highest close since May 22. Yields ‌move inversely to ⁠bond prices.

There may be caution in the JGB market ahead of a sale of 30-year bonds on Wednesday, according to Takayuki Miyajima, senior economist at Sony Financial Group.


"The recent rise in interest rates is driven more by inflation concerns and fears that the Bank of Japan is lagging behind in responding to price pressures than by supply-and-demand factors," Miyajima said in a note.

Japan's Economic ⁠Revitalisation Minister ‌Minoru Kiuchi said on Tuesday that he hoped the BOJ would work closely with the government to durably achieve its 2% ⁠inflation target. He also said the government would keep scrutinising interest-rate moves and their effects on the economy.

JGB yields have been under upward pressure as expectations firmed that the central bank will raise its policy rate by 25 bps to 1% at its June 15-16 meeting.

Interest rate swaps data through Monday showed a 93% probability of a hike, according to research firm Tokyo Tanshi.

The BOJ has ‌shifted to a more hawkish tone as the Iran war-driven energy shock lifted inflation risks, and Governor Kazuo Ueda has warned that energy shocks can become persistent via ⁠wages and expectations.

Moves in Japanese yields also tracked global bond markets, where U.S. Treasury and euro zone yields have risen in recent sessions amid persistent inflation pressures and expectations for central bank tightening.

The yield on the 20-year JGB advanced 3 bps to 3.665%, while the 30-year yield gained 3 bps to 3.965%.

The two-year yield, the one most sensitive to BOJ policy rates, was unchanged at 1.415%, while the five-year yield added 1 bp to 1.950%.