Japanese 10-year bond yields hit highest in 9 months, following weakness in U.S. debt market

The Japanese 10-year bond yields hit highest in 9 months on Friday following a heavy sell-off in U.S. Treasuries.

The benchmark 10-year bond yield, which moves inversely to its price, rose 2 basis points to 0.048 percent, the yield on long-term 30-year note also climbed 2 basis points to 0.66 percent and the yield on short-term 2-year note inched 2 basis points to -0.16 percent by 05:30 GMT.

The JGBs have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield jumped 4 basis points to 2.40 percent, highest since July 2015.

The consumer inflation in Japan extended it fall for the eight consecutive months this year, declining for the longest streak since 2011 amid the Bank of Japan’s expectations for the crucial indicator to drop further in the fiscal year through March next year.

Japan’s consumer prices, excluding fresh food, fell 0.4 percent year-over-year in October, following a 0.5 percent decline in September, data released by the Ministry of Internal Affairs and Communications showed Friday.

However, the overall consumer price index edged up 0.1 percent annually in October, reversing a 0.5 percent decrease in the previous month. It was the first increase in seven months. Also, core consumer prices, which exclude energy and food, rose 0.2 percent on year, after remaining flat in the preceding month.

In addition, fresh food prices jumped 11.4 percent in October due to typhoons and poor summer weather. This contributed almost 0.5 percentage point to the rise in overall CPI. However, energy costs dropped 7.9 percent, dragging down inflation by almost 0.6 percentage point.

Moreover, the Bank of Japan is highly expected to intervene in the fixed income market once again by buying unlimited bonds at fixed price if yields increase above the BoJ’s target level of zero percent following surge in the United States Treasury prices.

Last week, the BoJ offered to buy an unlimited amount of JGBs with 1 to 3 years of maturity at a yield of 0.020 percent above the previous close. It also offered to purchase an unlimited amount of JGBs with 3 to 5 years to maturity at 0.019 percent above the previous close.

Also, the central bank Governor Haruhiko Kuroda confirmed in his recent speech that the central bank will continue to intervene in the fixed income market to keep the JGB yields at a target level of zero percent.

Meanwhile, the benchmark Nikkei 225 closed up 0.26 percent at 18,381.22 and the broader Topix index ended 0.31 percent higher to 1,464.53 points.

While at 06:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index stood approaches bearish trend, currently at -72.09 (lower than -75 represents bearish trend).