[MARKET ANALYSIS] JGB yields rise to multi-decade highs on hawkish BoJ speak

JGB yields continue to rise with the 10-year (2.63%) now trading at levels not seen since 1997. The 30-year now up to the highs seen in January, where PM Takaichi called a snap election, spurring fiscal expansion fears.
Yields in Japan have remained elevated throughout the Iranian conflict and amidst growing fears of further fiscal expansion. PM Takaichi recently pledged to resume household electricity subsidies, though the government has attempted to alleviate fears by suggesting it would not need a supplementary budget.
On the monetary policy side of things, expectations of a near-term rate hike have risen following the BoJ SOO earlier in the week and the aftermath of a hawkish commentary via BoJ’s Masu earlier today. He stated that there is a need to raise rates at the earliest stage possible, highlighting risks surrounding the JPY’s depreciation. As it stands, markets assign a 64% chance of a hike in June and fully priced in by September.
The 30-year auction overnight gave an indication that demand remains strong, at these elevated yields. The b/c rose to 3.49 (prev. 3.12), though the wider tail suggests that some buyers are potentially holding out for a 4% yield.

What our latest note said

US Market Open, 22 Oct, 10:37 UTC · what it led with

Iran's IRGC Navy warned that US efforts to encourage passage could result in strikes on US bases.

Iran's Major General Rezaei said Iran has presented seven new conditions through mediators and will neither reopen the Strait of Hormuz nor resume negotiations until they are met.

Headlines that moved markets

FX headlines from our feed, and what the market did next.

Fed’s Waller (voter) says more rate hikes are likely needed to tame inflation, but there is flexibility over the pace and hikes do not need to be consecutive.

DXY+0.1%

Japan's GPIF didn't discuss allocation at its September meeting, Bloomberg reports.

USD/JPY+0.1%

Japanese FX Official Mimura says they are closely watching to see if markets take the clear message they are giving at face value. Not satisfied with or reassured by recent JPY action.

USD/JPY−0.5%

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[MARKET ANALYSIS] JGB yields rise to multi-decade highs on hawkish BoJ speak

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