Investing.com - On Wednesday, Japan experienced an increase in its ten-year bond yield, following the upward trajectory of U.S. Treasury yields during the prior night. In contrast, super-long security yields declined due to a lack of auction activity scheduled until the end of June.
The ten-year JGB (Japanese Government Bond) yield reached a peak of 0.435% early on before stabilizing at that level - marking an increase of 1.5 basis points from Tuesday's session close.
This rise in Japanese bond yields comes after U.S. Treasury yields bounced back from a brief drop on Tuesday when economic data revealed inflation growth had slowed down ahead of the Federal Reserve's upcoming interest rate decision.
Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities, explained that mid-to-long-term bonds in Japan saw their yields increase as they followed suit with those seen in U.S. Treasuries during the previous trading session.
He also noted that there would be no auctions for super-long bonds until month-end which has led to improved sentiment towards these securities and contributed to falling super-long end note yields—specifically a decline by half a basis point for both the thirty-year JGB yield (to reach 1.235%) and one full basis point for forty-year JGB yield (ending up at 1.400%).
Although market participants dismissed any potential changes from the Bank of Japan regarding ultra-low rate policies this week; Tsuruta suggested that bond sell-offs might occur towards the end of 2022 in anticipation of rate hikes. However, he emphasized that this would depend on economic conditions and inflation trends at that time.