Trends in 10-year JGB yield behavior around Policy Board meetings
JGB yield and yield curve scenario for December 18-22
The 10-year JGB yield trades with an upward bias this week. If the BoJ Policy Board decides to leave policy on hold when it meets on December 18-19, bond market participants begin rebuilding their short positions in anticipation of policy revisions as soon as January, putting the 10-year yield under renewed upward pressure. It is also dragged higher if the 10-year UST yield turns upward in a brief correction of its plunge below 4% last week. Meanwhile, a sense of increased supply/demand tightness weighs on the 10-year JGB yield if the MoF’s debt issuance plan for FY24, which is set to be approved by the Cabinet as early as December 22, confirms a reduction in calendar-base market issuance of coupon-bearing JGBs. The 20-year JGB yield trades at a level that keeps the 10s20s JGB spread at around 72bp.
Forecast range:
10-year JGB yield: 0.670%–0.750%
20-year JGB yield: 1.390%–1.470%
