Japanese government bonds tumbled on Friday, mirroring the losses in US Treasuries as traders ramped up bets on more aggressive interest-rate hikes from the Federal Reserve. The sell-off in bonds came after a second consecutive day of declines for Treasuries, reflecting growing expectations of tighter monetary policy.
The benchmark 10-year Japanese government bond yield surged by 8 basis points to 2.87%, while the 30-year yield climbed 7 basis points to 3.99%. The shift in sentiment also revived expectations for the Bank of Japan to tighten policy, with overnight-index swaps now pricing in an 87% chance of a rate hike by December. This marks a sharp reversal from last week, when the probability stood at around 50% amid a bond rally.
The move in Japanese bonds closely tracked the rout in Treasuries, as global investors adjusted their positions in anticipation of higher borrowing costs. The increased likelihood of a Fed rate hike has put downward pressure on bond prices across markets, with Japanese debt particularly vulnerable to shifts in US policy.