Japanese government bonds surged on Friday as global markets faced a risk-off shift, driven by a selloff in US stocks. The rally in bonds reflected growing demand for safe-haven assets amid heightened uncertainty. The benchmark 10-year yield dropped 12 basis points to 2.635%, while the 5-year yield fell 14 basis points to 2.05%, and the 2-year yield declined 13 basis points to 1.725%.
The market reaction also impacted expectations for the Bank of Japan's monetary policy. Traders scaled back their bets on a December rate hike, with overnight index swaps now pricing in just a 52% chance of an increase, down from 80% the previous day. This shift suggests growing caution among investors regarding the central bank's next move.