To read the full report, please download PDF.
Wait-and-see mood takes hold amid absence of obvious catalysts for December rate hike
The 10-year JGB yield treads water this week. There are likely to be few new catalysts from abroad with US markets off for the Thanksgiving holiday (Nov 28).The market's initial reaction to the second Trump "shock" has largely wound down, and volatility in the 10-year UST yield and USD/JPY has subsided. While there is lingering speculation of a BoJ rate hike at the December Monetary Policy Meeting, there are no events or data releases scheduled this week that might force the BoJ to hike. JGB market participants will probably continue to wait for dips to buy around the 10-year JGB yield’s recent high of 1.1%, posted in 1H FY24. In the event of mounting concerns about geopolitical risk, including heightening tensions in Ukraine, the 10-year JGB yield declines on a flight to safety, but the downside for yields is limited because bond market participants refuse to lower their yield targets. The 10-year yield therefore looks likely to remain rangebound between1.05% and 1.10%. The 30-year JGB yield is seen trading nervously in response to discussions between the ruling coalition and opposition parties about the FY25budget and tax reforms
