JGB yields rise as higher oil prices stoke inflation worries

Yields on Japanese sovereign bonds climbed on Friday, Business Recorder reported, as a rise in oil prices tied to uncertainty over the Middle East conflict revived inflation concerns. The benchmark 10-year yield added 3 basis points to 2.875%, ending a two-session slide from multi-decade peaks. Because yields move opposite to prices, the increase signals that bond prices were falling.

Treasury Secretary Scott Bessent said on Thursday that Washington would impose sanctions on Iran that he called the strictest in history, as the US stepped up economic pressure to bring an end to a war now nearly six months old. Crude oil rose about $2 overnight. Mizuho markets analyst Yuki Matsuda told clients that instability in the Middle East remained a strong worry and that costlier crude typically pressures Japanese debt.

Expectations that the Bank of Japan will lift interest rates at its September 17-18 policy meeting have strengthened, adding to upward pressure on yields. Core consumer prices accelerated in July, which bolstered the argument for tighter policy. Shorter maturities moved modestly, with the 2-year yield up 0.5 basis points to 1.675% and the 5-year up 1.5 basis points to 2.115%, while the 20-year and 30-year yields rose 5 and 5.5 basis points to 3.76% and 4.06%.