Japan bond yields diverge as investors weigh inflation, BOJ outlook

Japanese government bond yields diverged on Tuesday, according to Business Recorder, as short-dated yields edged up while long-dated yields eased. The 2-year yield, the rate most responsive to Bank of Japan policy moves, rose 1 basis point to 1.915%, and the 5-year yield added 1.5 bps to 2.350%. By contrast, the 30-year yield fell 1 bp to 4.045%, extending its decline to a fourth straight session.

The 40-year and 20-year yields were unchanged, while the benchmark 10-year yield held at 3.01%. Global bonds lacked direction, with US Treasury trading shut for Columbus Day and euro zone yields slipping on mixed energy prices and geopolitical risks. Traders are watching the BOJ after its September rate increase, and expectations lean toward another 25-basis-point hike by year-end.

Wholesale prices rose 6.8% year-on-year in September, easing from 7.6% in August and coming in below forecasts, while import prices surged 24.5% on yen weakness. Keisuke Tsuruta of Mitsubishi UFJ Morgan Stanley Securities said the recent long-end declines were little more than a rebound, and he remained wary about whether the trend would hold.