Market's attention shifts from timing of NIRP unwind to subsequent policy rate path
JGB yield and yield curve scenario for February 13-16
The 10-year JGB yield continues to follow developments in the 10-year UST yield while hovering in the 0.70% to 0.75% range after traders return from the three-day weekend. If the US CPI print for January (Feb 13) indicates a cooling of inflation and rekindles expectations of an early start to Fed rate cuts, the 10-year US bond yield declines and its Japanese equivalent falls in sympathy. Meanwhile, an improved reading for the Philadelphia Fed’s February manufacturing index (Feb15) would send the benchmark long-term yields in both countries higher. The 10-year JGB yield also takes on an upward bias if speculation of a March end to NIRP picks up. The 20-year JGB yield trades at a level that keeps the 10s20s JGB spread in the 75-80bp range.
Forecast range:
10-year JGB yield: 0.690%–0.740%
20-year JGB yield: 1.470%–1.520%
