Monday, December 4

Japan’s short-end yields rise after surprise gain in US consumer prices

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TOKYO — Yields on short-end Japanese government bonds climbed in early deals on Wednesday, after an unexpected rise in US consumer prices fueled bets for more aggressive Federal Reserve rate hikes to contain soaring inflation.

US 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 next Wednesday.

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

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

The two-year JGB yield rose 1 basis point to -0.070% and the five-year yield rose 2 basis points to 0.050%.

Overnight, US Treasury yields surged and a recession warning – the yield curve inversion – widened, with the yield on two-year Treasury notes spiking to an almost 15-year high.

In Japan, other notes were not traded yet. The 10-year JGB yield remained at 0.240%, while the 20-year JGB yield was at 0.870%.

The 30-year JGB yield stayed at 1.220% and the 40-year JGB yield was at 1.380%.

Benchmark 10-year JGB futures fell 0.55 point to 148.54, with a trading volume of 7,438 lots. (Reporting by Junko Fujita; Editing by Subhranshu Sahu)