Japanese Government Bond Yields Reach 31-Year High Amid Central Bank Hike Bets

The Japanese government bond yield for two-year bonds reached a 31-year high on Monday as investors bet on central bank rate hikes and uncertain debt auctions later in the week.

The two-year yield rose to 1.730%, its highest level since April 1995, while the benchmark 10-year JGB yield climbed 1 bp to 2.935%. Yields move inversely to bond prices.

Auction of 10-year and 30-year bonds is scheduled for Tuesday and Thursday respectively. Investors are concerned that a further tightening of monetary policy by the Federal Reserve may create an increasingly challenging environment for the Bank of Japan and JGB market.

Data released on Friday showed the Tokyo consumer price index rose in August, supporting the case for a BOJ interest rate hike next month. Experts predict that the BOJ will hike rates by 25 basis points followed by consecutive moves over the next quarters.