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Japan's two-year government bond yield is approaching 2%, with bets on a Bank of Japan interest rate hike heating up.

59 minutes ago

As investors ramp up bets on further interest rate hikes by the Bank of Japan (BOJ), the yield on Japan’s two-year government bonds is approaching the key 2% threshold. The two-year JGB yield, highly sensitive to monetary policy expectations, climbed 4 basis points to 1.975% on Monday, hitting its highest level since 1995. Other JGB tenors also faced pressure, with the five-year JGB yield rising 3 basis points to 2.43%. Strategists including Nakaji Okumura of SMBC Nikko Securities wrote in a report that as politicians at home and abroad grow more concerned about the weak yen, bets on the BOJ accelerating policy tightening are heating up. They added that fiscal expansion in major economies and rising commodity prices could further reinforce market expectations that Japan will eventually need to tighten monetary policy to curb inflation.

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