BOJ Tightening Bets Send Yen and Bonds Soaring
The Japanese yen and long-dated government bonds saw a significant rally on September 8 as investors priced in faster tightening by the Bank of Japan (BOJ) along with lower longer-term inflation risks.
The yen strengthened to its strongest level since February 17, reaching 152.89 per dollar, while Japan's 10-year government bond yield fell 4 basis points to 2.890 percent.
Ataru Okumura, senior rate strategist at SMBC Nikko Securities Inc., stated that underlying inflation was already around 2 percent and the BOJ was increasingly expected to accelerate the pace of rate hikes.
The simultaneous gains in the currency and bonds reflected different expectations at the short and long ends of Japan's rate market. The 20-year Japanese government bond (JGB) yield fell 5 basis points to 3.695 percent, while the 30-year yield dropped 5.5 basis points to 3.965 percent.