Boost in the Japanese 10-year bond yield

by Mike Elliot | Wednesday, Nov 16, 2016 | 126 views

Japanese bond -There has been a boost in the yield with a global sell off in government bonds. This has occurred following Trump’s victory in US Presidential elections. The ten-year bond yield rose for the first time in two months amidst conjectures that investors would be drawn to higher payment treasuries following Trump’s win. Japan has now joined the global trend of higher yields.

Yields act as benchmark

The yields on 10-year bond serve as benchmark widely. The Japanese bond yield had remained negative during the entire year. Moreover, Japanese bonds are mostly of shorter duration. The Bank of Japan took a decision in February and introduced negative rates on deposits that were held in the commercial banks. During September, the BOJ announced a yield target of zero for the ten-year bond. This was the first time it has set this kind of target on bonds of long term. The central bank stated that it would modulate the purchases in bonds for keeping the yield closer to the target. Even after the shift in the policy, the yield has managed to remain slightly below zero. However, this had not bothered the BOJ officials.

Impact of Trump’s victory

The election of Donald Trump has lifted the expectations for inflation as well as growth all over the world. This had led to a bond selloff. Whenever there is a decline in the prices, the bond yield rises. The 10-year U.S. Treasury note attained 2.30 per cent on Monday from 1.867 per cent which was the case on the Election Day.
Less movement has been noted in Japan. The 10-year yield has steadily moved upwards and rose to 0.005 per cent during trading hours in Tokyo. It stood at 0.07 per cent before US Presidential elections took place.

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