BOJ Rate Hike Bets Send Short-Term JGB Yields Soaring

Short-term Japanese government bond (JGB) yields rose to multi-decade highs on Thursday as investors increased bets that the Bank of Japan (BOJ) will raise interest rates.

The 2-year JGB yield climbed to its highest level since April 1995, reaching 1.865%, a 2 basis point increase from the previous day.

This move was fueled by higher equivalent US Treasury yields following the Federal Reserve's policy tightening and indication of another rate hike later this year.

Market pricing suggests that the BOJ will raise its policy rate by 25 basis points to 1.25% on Friday, with expectations of further quarterly increases potentially taking the key rate to around 2% over the next year.