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Japanese government bond yields fall; U.S. inflation in focus

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Japanese government bond (JGB) yields fell on Tuesday, following U.S. Treasury yields lower as investors awaited U.S. data on inflation to gauge the Federal Reserve’s future monetary policy tightening plans.

The key 10-year JGB yield fell one basis point 0.160%, which was the lowest level since March 9. It also touched the same level last Friday.

The yield has been falling in recent months as the Bank of Japan maintains its ultra-dovish stance, contrary to other central banks.

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The U.S. consumer price index report for July, due on Wednesday, will be closely scrutinized for clues to the scale of further action central banks may take to tackle inflation.

“U.S. expectations for inflation appear to be strongly linked to gas prices,” said Toru Moritani, chief market economist at Sumitomo Mitsui Banking Corporation. “On the other hand, fears of wage inflation are getting stronger, as shown by the July jobs report.”

Yields on longer-term JGB contracts also dropped.

The 20-year yield fell 1 basis point to 0.790%, the 30-year yield fell 2 basis points to 1.120%, and the 40-year yield fell 2.5 basis points to 1.255%.

The two-year JGB yield was flat at -0.105%, and the five-year yield went untraded.

Benchmark 10-year JGB futures rose 0.06 point to 150.6. (Reporting by Sam Byford and Tokyo markets team; editing by Uttaresh.V)

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