Japanese government bonds rose on Friday, tracking a rally in Treasuries, as a US stock selloff spilled into Asian markets and deepened a broader risk-off move. The 5-year JGB yield slid 10.5 basis points to 2.085%, while the benchmark 10-year debt yield fell 8.5 basis points.
Treasuries surged Thursday as the Nasdaq 100 plunged the most since 2020, fueling a broad flight from risk assets into government debt. The moves spilled over into Asian markets, with Japan's blue-chip Nikkei 225 Index falling as much as 7.1%.
The bond rally comes as concerns over the outlook for artificial intelligence investment, following a Democratic sweep in US midterm elections, triggered a sharp selloff on Wall Street. Ryutaro Kimura, senior bond strategist at BNP Paribas Asset Management, said the vigilance toward inflation risk, one of the primary factors that pushed JGB yields to historic levels in the first half, is receding. He expects investor demand, driven by the re-evaluation of JGBs, will keep yields under control in the short term.
Demand for Japanese debt has shown signs of improving after yields climbed to multi-decade highs this year. Global fund managers have grown more constructive on longer-dated JGBs as elevated yields, recovering domestic demand and foreign buying improve the backdrop. Meanwhile, the yen was steady against the dollar after strengthening as much as 0.6% to 157.54 on Thursday, outperforming all of its Group-of-10 peers. Masahiko Loo, chief fixed income strategist, APAC, at State Street Investment Management, said the longer-term implication may be more about market leadership than the investment cycle itself, noting that bonds are increasingly behaving like bonds again.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing