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Concerns about rising JGB yields likely to linger despite Ueda's testimony
The 10-year JGB yield trades with a downward bias this week. Its recent rapid advance pauses, in part because Governor Kazuo Ueda testified before the Lower House Financial Affairs Committee on February 21 that "in the exceptional event of a dramatic rise in the 10-year JGB yield, we would flexibly increase our purchases of JGBs" (Kyodo News). Nevertheless, the BoJ has not shifted to a dovish stance on monetary policy, and bearish sentiment in the 10-year sector persists due to lingering speculation of further rate hikes. Concerns about Deputy Governor Shinichi Uchida’s speech to a meeting of business leaders in Shizuoka City on March 5 and the release of the first round of results from this year’s wage negotiations on March 14 prevent a reversal of recent market action. If the February CPI print for Tokyo (Feb 28) comes in hotter than expected, the 10-yearJGB yield could even take out its recent intraday high of 1.455%. Meanwhile, the30-year JGB continues to trade relatively firmly due to limited upward pressure on yields from the BoJ’s rate hikes.
