Japan Economic & Financial Weekly

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Revising our outlook for JGB yields following Donald Trump's victory

The 10-year JGB yield hovers around 1.0% this week. As the rise in bond yields spurred by the so-called Trump trade following the US election pauses, any rise in the 10-year yield over 1.0% is met by dip buying that curbs further advances. BoJ bond-buying operations on November 12 also provide support for JGBs. Meanwhile, lingering speculation of a BoJ rate hike keeps the 10-year yield from falling below 0.90%. Corrective pressures ahead of the 30- and 5-year offerings on November 13 and 15, respectively, also weigh on the market. The 20-year JGB continues to trade weakly because of lingering concerns about fiscal stimulus. If progress in the talks between the LDP-Komeito coalition and the Democratic Party for the People (DPP) adds to these concerns, expectations of a widening fiscal risk premium put steady upward pressure on super-long JGB yields in particular.