BOJ Rate Hike Bets Spark JGB Yield Surge

Japanese government bonds fell on Friday, causing short-term yields to reach multi-decade highs. The two-year yield jumped by 0.5 basis points (bp) to 1.650%, its highest level since May 1995.

The five-year yield also advanced, reaching a record high of 2.135% and extending its winning streak to five sessions.

The benchmark 10-year JGB yield climbed by 0.5 bp to 2.875%. Expectations around a Bank of Japan interest rate hike next month have intensified, with sources suggesting that the central bank may raise rates as soon as September.

Takayuki Miyajima, senior economist at Sony Financial Group, noted that speculation about an early interest rate hike by the BOJ continues to weigh on the market.