Japan Economic & Financial Weekly

Considering scenario in which 10-year JGB yield prices in March end to NIRP

  • By Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
  • Feb 05, 2024
  • JGB yields
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Considering scenario in which 10-year JGB yield prices in March end to NIRP

JGB yield and yield curve scenario for February 5-9
The 10-year JGB yield responds to developments in the 10-year UST yield this week but does not break out clearly in one direction or the other. If the official US payrolls report for January, due out on the evening of February 2 JST, indicates as lowdown in job growth and weakening wage pressures and the 10-year UST yield reacts by testing the downside, Japan’s benchmark long-term bond yield starts the week lower. Even then, it soon finds support due to speculation of an early unwinding of NIRP at the March Policy Board meeting. But if the results of the Jobs report have already been priced in1and UST investors decide to take profits, sending the 10-year UST yield higher for the first time in five days, the 10-year JGB yield starts the week higher. It then continues to follow its US counterpart as the latter digests the results of the upcoming quarterly Treasury auctions (3-year note on Feb 6, 10-year note on Feb 7, and 30-year bond on Feb 8). The 20-year JGB yield trades at a level that keeps the 10s20s JGB spread at around the key psychological level of 80bp.
Forecast range:
10-year JGB yield: 0.650%–0.700%
20-year JGB yield: 1.450%–1.500%

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