Factors driving 10-year JGB yield's climb above 1.6%; future outlook
Key points
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10-year JGB yield has broken above key psychological threshold of 1.6%; risk premia have declined since Upper House election, but rate hike speculation has mounted
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Return of terminal rate expectations to pre-tariff shock peak could lift 10-year yield by just under 10bp
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Risk premia will depend on political situation and may decline if early LDP leadership election and large tax cut are avoided, but we estimate downside for 10-year yield at less than 15bp in that case