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Bonds

Japan 10-Year Yield Tracks Treasury Yields Higher

Japan’s 10-year government bond yield climbed to around 2.99% on Friday, moving back toward 30-year highs and tracking a rise in US Treasury yields following a disappointing bond buyback operation from the US government. Data also showed US producer inflation accelerated last month, strengthening expectations for a Federal Reserve rate hike next week. Meanwhile, oil prices continued to rise as the US-Iran war showed no signs of easing, heightening inflation risks. Domestically, data showed Japanese producer inflation increased 7.6% in August, supporting expectations for a Bank of Japan rate hike this month. Sentiment among large manufacturers also improved sharply in Q3, reaching its strongest level since Q4 2021 amid strong government support measures. Earlier this week, BOJ board member Kazuyuki Masu indicated that the central bank will continue tightening policy and scale back monetary support as underlying inflation moves closer to its 2% target.

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