By Rocky Swift
Japanese government bond (JGB) yields rose for a second straight session on Tuesday as inflation concerns and a soft yen weighed on sentiment.
Here are a few details:
The benchmark 10-year JGB yield (JP10YTN=JBTC) climbed 4.5 basis points (bps) to 2.675%, set for the highest closing level since June 11. The 5-year yield (JP5YTN=JBTC) added 1.5 bps to 1.885%. Yields move inversely to bond prices.
U.S. Treasury yields edged higher overnight as crude prices advanced amid Middle East tensions and ahead of key U.S. jobs data. The yen fell to the 162-per-dollar level on Tuesday, the weakest point since 1986.
With the yen trading at a 40-year low, "concerns are likely to grow over the risk of inflation exceeding expectations due to the Bank of Japan's delay in raising interest rates further," Hiroshi Watanabe, a senior economist at Sony Financial Group, said in a note.
The 2-year JGB rallied after an auction of the notes showed an increase in demand compared to the previous sale in May. The 2-year yield (JP2YTN=JBTC), the one most sensitive to BOJ rates, slid 4 bps to 1.355%, extending its decline to four days.
Prime Minister Sanae Takaichi's administration appointed Ayano Sato, seen as an advocate of loose monetary policy, as a central bank board member on Tuesday.
"The market is closely monitoring the relationship between the government and the Bank of Japan," Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said in a note. "Against this backdrop, attention is focused on what views Sato will express regarding further interest rate hikes and expansionary fiscal policy."
The yield on the 20-year JGB (JP20YTN=JBTC) advanced 9 bps to 3.640%, while the 30-year yield (JP30YTN=JBTC) gained 11 bps to 3.940%. The yield on the 40-year JGB (JP40YTN=JBTC), Japan's longest tenor, increased 6.5 bps to 3.770%.
($1 = 162.2300 yen)