Benchmark JGB yields hit one-month high as inflation fears weigh
By Rocky Swift
TOKYO, March 16 (Reuters) - Benchmark Japanese government bond yields touched a one-month high on Monday as the escalating Middle East crisis fuelled expectations of higher inflation and potential policy tightening by the Bank of Japan.
The 10-year JGB yield JP10YTN=JBTC briefly touched 2.25%, its highest since February 10, before easing in early trade. Yields move inversely to bond prices.
Global bond yields are on the rise as the war in Iran, now in its third week, pushes oil prices sharply higher and increases pressure on central banks to combat inflation fears.
The BOJ is widely expected to keep its key interest rate steady at its policy meeting on Thursday. Still, the combination of surging imported energy costs and a weakening yen is strengthening the case for a faster pace of rate hikes.
"Against the backdrop of growing momentum for further BOJ rate hikes, short- to medium-term yields are likely to rise, driven by the risk-neutral rate," Barclays analysts led by Shinichiro Kadota said in a note.
Meanwhile, markets were choppy on the day, with risk appetite stabilising slightly after U.S. President Donald Trump said he is urging other countries to help safeguard the Strait of Hormuz, a crucial oil shipping route.
Futures on the 10-year JGB 2JGBv1 rose 0.14 yen to 131.320.05 yen to 131.23.
The 30-year yield JP30YTN=JBTC added 1 bps to 3.515%. The two-year yield JP2YTN=JBTC, the one most sensitive to BOJ policy moves, eased 0.5 bps to 1.28%.
