JAPAN’S benchmark 10-year bond yield fell to its lowest since April as the global bond rally accelerated following poor economic data in the US that’s spurred traders to bet big on the Federal Reserve’s monetary policy easing.
The yield on the 10-year government bond dropped 17 basis points to 0.785 per cent on Monday (Aug 5) after US employment figures piled onto a string of data pointing to an economic slowdown. Yields on Treasuries across the curve declined on Friday on the labour numbers, then tumbled again on Monday. A circuit breaker was triggered for Japanese government bonds after the five-year and seven-year yields also fell.
Fears of an economic slump has led to a bond-market rally as traders bet that the Fed will need to start cutting rates soon, especially after central banks in Canada and Europe began to ease policy. Japanese and US stock prices have also plunged, adding to the demand for government bonds.
Still, the latest moves are “likely to be pushed back due to the Bank of Japan’s additional rate hike as well as caution ahead of the 10-year JGB auction tomorrow”, said Makoto Suzuki, a senior bond strategist at Okasan Securities Group. BLOOMBERG
