Weekly preview of 10- and 20-year JGB yields: Downside likely to be modest given concerns about overextended market
JGB yield and yield curve scenario for November 20-24
The 10-year JGB yield basically tracks developments in its US equivalent this week. No major catalysts are anticipated in the US, with market conditions expected to be mostly calm ahead of the Thanksgiving holiday. The 10-year UST yield is currently hovering around 4.5% as it seeks a sense of direction. Lingering speculation of an end to NIRP along with concerns that bond prices may have become overextended imply any downside for JGB yields is likely to be modest. Speculation of further cutbacks in the BoJ’s bond-buying operations also helps to cap the upside for JGBs. Weakish results for the 20-year auction on November 21 could prompt some selling into strength in and around the super-long sector, but buying by domestic investors who missed earlier dips provides support for bonds and limits the upside for yields.
Forecast range:
10-year JGB yield: 0.720%–0.800%
20-year JGB yield: 1.450%–1.550%
