Japan's 30-year bond yield hits all-time high: Why it matters
What's the story
Japan's 30-year government bond yield has hit an all-time high of 3.21%, following a similar trend in US Treasury yields. The increase comes as investors prepare for Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium. The 20-year and 10-year Japanese government bonds (JGBs) also saw their yields rise to levels not seen since November 1999 and October 2008, respectively.
Market reaction
US Treasury yields rise
On Thursday, US 10-year Treasury yields rose by nearly four basis points to 4.332%. This was due to traders scaling back their expectations for a September interest rate cut by the Federal Reserve. Analysts said market players were influenced more by purchasing managers' surveys indicating a significant uptick in US business activity and hiring this month, than by a separate report showing new jobless claims' biggest jump in three months.
Fed outlook
Powell to speak today
Powell will speak later today, the second day of the three-day Jackson Hole gathering. On day one, Fed speakers generally took moderately hawkish stances. Cleveland Fed President Beth Hammack said she sees no case for imminent policy easing, while Chicago Fed President Austan Goolsbee flagged services inflation as a concern for lowering rates. Market bets on a quarter-point Fed cut next month last stood at 75%, down from the 80% a day earlier, according to LSEG data.
Political influence
Political limbo in Japan
Japan's super-long yields have been under extra pressure to rise since the ruling coalition lost its upper house majority. The political shift has given more power to opposition parties advocating consumption tax cuts. Prime Minister Fumio Kishida has so far refused to step down, resulting in a political limbo that could delay a supplementary budget. Mizuho Securities economist Yasuke Matsuo said these risks are not fully priced in and upward pressure on interest rates will need close monitoring for now.