Japan Economic & Financial Weekly

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Upside targets for super-long JGB yields based on technical analysis of spreads

The 10-year JGB yield treads water with an upward bias this week. Concerns linger about significant reductions in the BoJ’s bond purchases and early additional rate hikes amid continued weakness in the yen. The market trades nervously around the four buying operations scheduled at the end of the week. Yields move higher if the Bank announces that it is dialing back its offers. If the 10-year UST yield reverses higher and tests the upside on fading expectations of Fed rate cuts in 2024, the 10-year Japanese yield moves higher in sympathy. However, substantial dip-buying demand around the key psychological threshold of 1% prevents any dramatic increase in yields. Both the 30-year JGB yield and the 30s10s JGB spread trade with an upward bias.