Japan's 10-Year Yield Hits 3%, Global Bond Market in Turmoil
The Japanese government and Bank of Japan (BOJ) are under pressure to tighten monetary policy as the country's 10-year yield has hit a level unseen since September 1996. The yields on Japanese 10-year bonds have more than tripled in two years, driven by inflation, fiscal worries, and expectations that the BOJ will hike interest rates this month.
The BOJ's decision to raise its benchmark rate from 0.5% to 1% in June has contributed to the bond sell-off. Markets are pricing an 80-90% chance of a further hike to 1.25%, which would represent a 0.75% increase in just nine months.
US Treasury Secretary Scott Bessent's comments at the G20 meeting have added to the pressure on Japan to tighten its monetary policy. He stated that he believed the Japanese government and BOJ will take steps that will lead to a stronger yen, but when asked directly about higher interest rates, he replied: 'I think the market is pricing that in now.'
The global bond market is also experiencing a sell-off, with yields hitting their highest since 2008. The Bloomberg gauge of government debt has risen for a fourth day to 3.72%, driven by inflation concerns and expectations of a US rate hike.