Global Market: Japan bond yields rise as investors eye BOJ policy meeting

The benchmark 10-year JGB yield climbed 2 basis points to 2.805%, rising for a second consecutive session. Bond yields move inversely to prices.

Longer-dated yields also advanced, with the 20-year JGB yield rising 4 basis points to 3.635% and the 30-year yield gaining 5.5 basis points to 3.875%. The two-year yield, which is particularly sensitive to BOJ policy expectations, edged up 0.5 basis points to 1.880%, while the five-year yield increased 1 basis point to 2.240%.

According to Reuters, global bond markets have faced a selloff over the past month, pushing long-term yields to multi-decade highs amid persistent inflation, elevated energy prices and concerns about rising government borrowing.

US Treasury yields mostly edged higher on Tuesday in subdued trading ahead of the Federal Reserve’s policy decision, while euro zone bond yields broadly declined as oil prices fell.

Domestic inflation data has reinforced expectations that the BOJ will maintain a hawkish policy stance. The central bank’s trend inflation index rose to 3.2% in September from a year earlier, accelerating from 2.6% in August, data showed on Tuesday, Reuters reported.

The BOJ is scheduled to meet on October 29-30 and is widely expected to hold interest rates steady after raising its policy rate in September to 1.25%, its highest level in 31 years. Markets expect a potential 25-basis-point increase to 1.5% in December.

Fiscal policy uncertainty is also weighing on the Japanese bond market. Reuters cited Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, as saying in a note that uncertainty surrounding the next fiscal year’s budget and the government’s JGB issuance plan remained elevated, adding to concerns about the outlook for bonds.

Investors will closely watch the BOJ’s policy statement and guidance for clues on the timing of further rate increases, alongside developments in the government’s borrowing plans, Reuters reported.