Japan Economic & Financial Weekly

The 10-year JGB yield treads water with an upward bias and a certain amount of volatility this week. The 10-year UST yield resumes testing the downside and puts downward pressure on its Japanese equivalent if the November US payrolls report, due out on the evening of December 8 (JST), comes in softer than expected. The results are similar if Fed Chair Jerome Powell’s post-FOMC press conference on December 13 fuels expectations of early rate cuts in the US. However, the 10-yearJGB yield soon finds support from lingering worries about higher JGB yields fueled by a raft of news reports speculating about policy revisions at the December 18-19Policy Board meeting. The 10-year yield assumes an upward bias in the event that the December Tankan survey (Dec 13) provides further evidence of a virtuous cycle of wages and prices. It is also driven higher if the 5-year JGB offering on December 12 and the 20-year auction on the 14th fail to attract buyers and end with poor results. The 20-year JGB yield trades at a level that keeps the 10s20sJGB spread at just under 80bp.