Japanese government bonds rallied on Friday, pushing the 10-year yield to a two-month low of 2.795%. Investors sought safe-haven assets after a global equity selloff. Takayuki Miyajima said elevated yields made bonds attractive during risk aversion. Meanwhile, markets now watch the Bank of Japan for clues on future rate hikes.
Japanese government bonds (JGBs) rallied on Friday, pushing the benchmark 10-year yield to its lowest level in more than two months as a technology-led selloff in global equity markets prompted investors to seek safe-haven assets, Reuters reported.
The 10-year JGB yield fell 8.5 basis points to 2.795%, putting it on track for its lowest close since early August and marking its fifth consecutive session of declines. Bond yields move inversely to prices.
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According to Reuters, the rally followed a sharp decline in US Treasury yields on Thursday, as a selloff in equities revived concerns about the sustainability of the artificial intelligence boom and triggered a broader flight to safety. Germany's 10-year Bund yield dropped about 7 basis points, while its French counterpart rose amid concerns over the country's public finances.
Japanese government bonds attracted buying interest as investors reassessed risk after yields rose earlier this year. Takayuki Miyajima, senior economist at Sony Financial Group, said in a note that elevated JGB yields had made the bonds more attractive during periods of risk aversion, adding to the likelihood of further downward pressure on the 10-year yield, Reuters reported.
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BOJ policy outlook in focus
Investors are also assessing Japan's inflation trajectory and the monetary policy outlook ahead of the Bank of Japan's policy meeting next week.
Economy Minister Minoru Kiuchi said on Friday that Japan was not yet in a position to officially declare an end to deflation. His remarks followed media reports suggesting that the BOJ could indicate at its upcoming meeting that underlying inflation had broadly reached its 2% target.
Japan's core consumer price index, which excludes fresh food, rose 2.1% year-on-year in September, accelerating from 1.7% in August, according to data released on Friday, Reuters reported.
The BOJ, which raised its policy rate to 1.25% in September, is widely expected to keep rates unchanged at its meeting next week. However, markets are pricing in another rate hike as early as December.
Longer-dated JGB yields also ease
Across other maturities, the 20-year JGB yield declined 5.5 basis points to 3.625%. The 30-year and 40-year yields were unchanged.
The five-year yield fell 6.5 basis points to 2.225%, while the two-year yield, which is particularly sensitive to expectations for BOJ policy rates, remained flat at 1.895%.
The decline in longer-dated yields reflected broader demand for safe-haven assets, while the relatively stable two-year yield suggested investors were still assessing the timing of the central bank's next policy move, Reuters reported.
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