Japanese government bonds extended their recent gains on Friday as a deepening global selloff in technology stocks drove investors into traditional haven assets. The appeal of havens was also evident in US Treasuries, which largely held the advances made Thursday.
The bond rally pushed the benchmark 10-year JGB yield down 12.5 basis points to 2.755%, while the five-year yield dropped as much as 10.5 basis points to 2.185%. The move highlights the renewed defensive appeal of Japanese debt after yields climbed to multi-decade highs earlier this month amid concerns over inflation, fiscal spending and a global bond selloff. Analysts say those elevated yields now offer investors greater incentive to hold JGBs during periods of market stress.
State Street Investment Management strategist Masahiko Loo said that when risk assets wobble, duration provides diversification and investors are being paid carry while they wait. Friday's rally came despite data showing Japan's key inflation gauge rose above the Bank of Japan's 2% target for the first time this year. While officials are expected to keep rates unchanged at next week's policy meeting, the data reinforced expectations for another increase by year-end.
The yen swung between gains and losses after earlier jumping as much as 0.4% versus the dollar, following a 0.9% rise on Thursday. Carol Kong of Commonwealth Bank of Australia said the yen has been favored as a safe haven as this week's major US tech earnings raised doubts about the AI-led US growth narrative. Shoki Omori of Deutsche Securities cautioned against extrapolating a trend yet, saying the durability of the moves will be tested when the BOJ announces its policy decision next week.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing