Japan Economic & Financial Weekly

The 10-year JGB yield hovers in the 0.50% - 0.55% range this week as it searches for a sense of direction. Continued buying (and buybacks) driven by fading speculation of an end to NIRP in FY23 weighs on JGB yields. The 10-year JGB yield also comes under downward pressure if its US equivalent resumes testing the downside below 4%. However, any decline in yields soon runs up against lingering concerns about a surprise announcement of policy changes at the January 22-23BoJ meeting. And if buybacks wind down and investors start to worry that bond prices have overextended themselves, speculative selling results in an upward bias for the 10-year yield. The 20-year JGB yield trades at a level that keeps the 10s20sJGB spread at around 70bp until the 20-year auction on January 18.