Buying in longer-dated bonds widened demand across maturities after the previous session's selloff, while calmer U.S. rates and a pause in crude oil gains added downward pressure on yields.
Japan's benchmark new 10-year JGB yield fell 0.025 percentage point from the previous day to 2.795% on the morning of the 4th, briefly touching 2.790%, as investors bought back longer-dated bonds after the prior session's selloff. The move followed a rise to 2.805% on the morning of the 3rd, when the yield was up 0.015 percentage point from the previous week's close amid higher U.S. Treasury yields and speculation that the Bank of Japan could accelerate the pace of rate hikes. Market participants described the 4th's move as buying gaining the upper hand on a rebound, with demand spreading across a broad range of maturities after weakness in the long end. A pause in crude oil price gains and lower U.S. interest rates from the prior day also helped pull domestic yields lower. The article says the OIS market (overnight index swap, a rate-expectation derivative) is being watched as short-term rate expectations feed into long-term yield formation. The next test is whether BOJ tightening expectations move further in a front-loading direction or prove already priced in, while crude oil and the degree of U.S. rate spillover into Japan's long-end zone are likely to shape near-term moves.