Global Market: JGB yields climb as investors await BOJ, Fed policy decisions

The benchmark 10-year JGB yield rose 1.5 basis points to 2.795%. Bond yields move inversely to prices.

According to Reuters, Japanese and US equities rallied sharply as optimism returned to the AI sector ahead of quarterly results from major technology companies, including Alphabet and Microsoft. The gains came as investors positioned themselves ahead of the US Federal Reserve's monetary policy announcement on Wednesday.

US Treasury yields declined overnight, reflecting investor positioning ahead of the Fed's decision.

In Japan, attention is focused on the Bank of Japan's October 29-30 policy meeting. The central bank is widely expected to keep interest rates unchanged after raising its policy rate to 1.25% in September. However, many market participants anticipate another increase to 1.5% in December, while some see January as an alternative timeline.

Barclays' head of foreign exchange and rates strategy, Shinichiro Kadota, noted that the combination of US technology earnings and monetary policy meetings in Japan and the United States could leave the yen interest rate market without a clear direction in the near term, Reuters reported.

Debate over the BOJ's policy trajectory has also intensified after former central bank officials published books. Former BOJ Governor Haruhiko Kuroda indicated that he expected the central bank to consider raising interest rates by 25 basis points at each upcoming policy meeting to bring borrowing costs closer to neutral levels.

In a separate book, former BOJ Deputy Governor Masazumi Wakatabe argued that the central bank would face questions if it raised rates while real economic growth remained negative and inflation was driven largely by rising costs, Reuters reported.

Across the JGB yield curve, the 20-year yield rose 1 basis point to 3.595%, while the 30-year yield remained unchanged at 3.805%.

The two-year JGB yield, which is particularly sensitive to expectations for BOJ policy rates, increased for a second consecutive session, rising 1 basis point to 1.885%. The five-year yield climbed 1.5 basis points to 2.240%.

Investors are expected to closely monitor this week's central bank decisions and corporate earnings for clues about the outlook for interest rates, inflation and risk appetite. The BOJ's guidance on the timing of further rate increases will remain a key factor for Japanese government bonds in the coming weeks.