Japan bond yields fall as oil prices slide on hopes of Iran war de-escalation

Japanese government bond (JGB) yields fell on Thursday, tracking a drop in US Treasury yields, as lower oil prices eased inflation concerns and boosted expectations of a quicker end to the Iran war after President Donald Trump lost the US midterm elections.

The benchmark 10-year JGB yield fell 5.5 basis points to 2.755% as of 0450 GMT. Brent crude prices dropped nearly $9 overnight, reducing concerns about energy-driven inflation and supporting demand for government bonds.

Read more: US stocks today: Dow rallies 1,500 pts, S&P, Nasdaq over 1% as Democrats win midterm elections


Investors largely brushed aside a relatively weak outcome at the latest auction of 10-year Japanese government bonds, suggesting that broader global market developments were driving sentiment.

Market participants also showed little immediate reaction to minutes from the Bank of Japan's (BOJ) September policy meeting, which indicated that policymakers supported further interest rate increases.

The minutes reinforced expectations that the Japanese central bank would continue its monetary tightening cycle, even as declining oil prices eased near-term inflation concerns.

In the superlong maturity segment, the 20-year JGB yield declined 2 basis points to 3.64%, while the 30-year yield dropped 6 basis points to 3.865%.

Read more: Asian shares mostly advance following US midterms, though Kospi falls on selling of chipmakers

Shorter-dated bonds also advanced, with the two-year JGB yield falling 3 basis points to 1.855% and the five-year yield retreating 5.5 basis points to 2.195%.

However, analysts cautioned that the decline in bond yields could be limited by uncertainty surrounding the geopolitical outlook and expectations of further BOJ rate hikes.

Yuki Yamada, an analyst at Mizuho Securities, said uncertainty over whether the Iran conflict would de-escalate could prevent yields from extending their decline in a sustained manner. He also noted that expectations of BOJ rate increases were likely to remain firm in the near term.


(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)