Japanese government bond yields fell across the curve on Friday as an AI-driven selloff in equities boosted demand for haven assets. The rally in US Treasuries spilled over into the Japanese market, with the benchmark 10-year yield dropping as much as 9 basis points to 2.79% and the 20-year yield falling 5.5 basis points. "Bonds are behaving like bonds again," said Masahiko Loo, a Tokyo-based senior fixed-income strategist at State Street Investment Management. "When risk assets wobble, duration provides diversification and investors are finally being paid carry while they wait."
Friday's bond rally occurred despite data showing Japan's key inflation gauge rose above the Bank of Japan's 2% target for the first time this year. This supports the case for a widely expected interest-rate hike in December. However, Masahiko Loo noted that the inflation data has taken a back seat as markets focus on risks to growth and concerns surrounding AI.
The article references a Bloomberg Markets piece titled "Japan Inflation Rises Above BOJ Target, Backing Rate Hikes."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing