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Revising scenario for 10-year JGB yield after moving upexpected timing of next rate hike
The 10-year JGB yield trades with an upward bias this week. Concerns about early and repeated rate hikes taking the policy rate up to the neutral rate of interest are rekindled by (what we expect will be) a hawkish Summary of Opinions for the June13-14 Policy Board meeting, set to be released on June 24. Together with concerns about the BoJ’s detailed plan for reducing its bond purchases "significantly"(Governor Kazuo Ueda), this gives sellers the upper hand throughout the week, with buyers remaining on the sidelines. However, the 10-year JGB yield encounters upside resistance if expectations of a Fed rate cut by the end of 2024 result in a downward bias for the 10-year UST yield. The 30-year JGB yield trades at a level that keeps the 10s30s JGB spread at around 117bp.
