Probability of downward shift in 10-year JGB yield (risk scenario)
JGB yield and yield curve scenario for December 4-8
The 10- and 20-year JGB yields and yield curve scenario for December
The 10-year JGB yield continues to track movements in the 10-year UST yield this week as it searches for a sense of direction. It trades with a downward bias if expectations of early Fed rate cuts prompt the 10-year UST yield to test the downside, and it declines in the event of continued or increased buybacks by foreign investors. However, it assumes an upward bias if the 10-year UST yield rises in a reaction to its recent plunge. If the market views the BoJ’s first workshop on the "broad-perspective review of monetary policy," scheduled for December 4,as effectively laying the groundwork for further policy revisions, speculation of an early end to negative interest rates puts renewed upward pressure on JGB yields. The 10-year JGB yield also takes on an upward bias if the Bank decides to reduce its bond-buying offers. The 20-year JGB yield trades at a level that keeps the10s20s JGB spread at around 75bp.
Forecast range:
10-year JGB yield: 0.635%–0.745%
20-year JGB yield: 1.385%–1.495%
