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UPDATE 1-Japan's 10-year bond yield hits BOJ's upper limit after U.S. CPI shock

UPDATE 1-Japan's 10-year bond yield hits BOJ's upper limit after U.S. CPI shock

Reuters · 09/14/2022 05:28
UPDATE 1-Japan's 10-year bond yield hits BOJ's upper limit after U.S. CPI shock

Changes headline and first paragraph, updates bond yields

- Japan's 10-year government bond yields hit the upper limit of the Bank of Japan's target on Wednesday, after an unexpected rise in U.S consumer prices fuelled bets for more aggressive Federal Reserve rate hikes to contain soaring inflation.

U.S. consumer prices rose in August and underlying inflation accelerated amid rising costs for rents and healthcare, giving the Fed ammunition to deliver a third 75-basis-point interest rate hike Wednesday.

"The outcome... was fairly shocking to investors, who have been witnessing other strong economic data," said Ataru Okumura, a strategist at SMBC Nikko Securities.

"There is a caution that the Fed would have to tighten its grip if it wants to contain inflation to 2%."

The 10-year JGB yield JP10YTN=JBTC rose 1 basis point to 0.250%, its highest since June 17.

Unlike its peers, the BOJ has maintained its ultra-low interest rates to support the economy. Under the yield curve control, the BOJ guides the 10-year JGB yield around 0% and allows it to move 25 basis points on either side of zero.

Overnight, U.S. Treasury yields surged and a recession warning - the yield curve inversion - widened, with the yield on two-year Treasury US2YT=RR spiking to an almost 15-year high. US/

In Japan, the five-year yield JP5YTN=JBTC rose 1.5 basis points to 0.045%.

The two-year JGB yield JP2YTN=JBTC was flat at minus 0.080%.

Yields on longer-ended fell, with the 20-year JGB yield JP20YTN=JBTC falling 2 basis points to 0.850% and the 30-year JGB yield JP30YTN=JBTC falling 4 basis points to 1.180%.

The 40-year JGB yield JP40YTN=JBTC fell 4 basis points to 1.340%.

Benchmark 10-year JGB futures 2JGBv1 fell 0.37 point to 148.72, with a trading volume of 19,893 lots.



(Reporting by Junko Fujita; Editing by Subhranshu Sahu)

((813-4563-2711, junko.fujita@thomsonreuters.com, Reuters Messaging:junko.fujita.reuters.com@reuters.;))