Japan's Government Bond Yields Surge in Tandem with U.S. Treasury Rates

Monday saw an uptick in Japan's government bond (JGB) yields, echoing the rise in U.S. Treasury yields. Despite the Bank of Japan's (BOJ) routine bond-buying operation, its influence on the market appeared diminished.

The two-year government bond yield (2JGBv1) surged by 1.5 basis points (bps) to 0.225%, marking its highest level since March 2011. Simultaneously, the 10-year JGB yield (JP10YTN=JBTC) climbed by 1.5 bps to 0.78%, reaching its peak since March 18.

The surge in U.S. Treasury yields toward the end of the previous week was catalyzed by data revealing stronger job creation in the world's largest economy than initially anticipated. This data hinted that the Federal Reserve would likely refrain from promptly reducing interest rates.

During Asian trade, the two-year U.S. Treasury yield (US2YT=RR) rose to 4.782%, marking its highest level since Nov. 28.

On Monday, the BOJ maintained its bond-buying amounts for bonds maturing between one year and over 25 years. This decision came as a surprise to the market, as there was an expectation for a reduction, especially after the BOJ had indicated a scaling back of its JGB purchases for the April-June quarter.

"Ataru Okumura, senior rates strategist at SMBC Nikko Securities, suggested that the BOJ might maintain these amounts for some time, especially given that it kept the offer amounts unchanged for bonds maturing in 3-5 years," the statement said.

Meanwhile, the Ministry of Finance has slashed the annual issuance of JGBs with maturities of 20 years and less in the current fiscal year starting from April 1. Notably, the issuance of two-year bonds has been reduced by 3.6 trillion yen ($23.72 billion), marking the largest cut in terms of amounts.

On Monday, the five-year yield (JP5YTN=JBTC) increased by 0.5 bps to 0.385%, while the 20-year JGB yield (JP20YTN=JBTC) rose by 1 bp to 1.540%. Additionally, the 30-year JGB yield (JP30YTN=JBTC) saw a gain of 2 bps, reaching 1.825%. Furthermore, the 40-year JGB yield (JP40YTN=JBTC) climbed by 2.5 bps to 2.135%.

(Note: Conversion rate: $1 = 151.7900 yen)