Japan Economic & Financial Weekly

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First week of April elicits start-of-FY demand for JGBs

The 10-year JGB yield hovers in the 0.75% - 0.80% range this week as it searches for a sense of direction. It remains under upward pressure from speculation about additional rate hikes and a reduction in BoJ bond purchases. Expectations of early additional rate hikes gather momentum if the market anticipates upward revisions to the Bank’s inflation projections in the April 26 Outlook Report.1On the other hand, buyers will be reassured if the BoJ makes no change to its offers at the April8 buying operations, following a similar decision last week. The 5-year offering on April 9 and the 20-year auction on April 11 would then confirm meaningful start-of-FY demand for JGBs, absorbing any upward pressure on yields. The 30-year JGB yield trades at a level that keeps the 10s30s JGB spread at around 105bp.