2-Year Yield Nears 2%, Rate-Hike Bets Intensify — Would Be First Time in 31 Years

Bloomberg··JP·Read original
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Summary · why it matters

The 2-year yield, which is sensitive to monetary policy expectations, rose as high as 1.975% on the 28th, up 4 basis points from the previous trading day, approaching a level that would mark the first 2% reading in 31 years. Selling pressure hit other maturities as well, with the 5-year yield climbing 3 basis points to 2.43%, a record high. After the Bank of Japan decided on a rate hike at this month's policy meeting, in line with market expectations, Governor Kazuo Ueda gave no clear signal on the pace of future tightening, and concern is spreading in the market that the BOJ is falling behind the curve. SMBC Nikko Securities chief rates strategist Jin Okumura said trades betting on an acceleration of BOJ rate hikes are gaining the upper hand, while former BOJ board member Kazuo Momma said in an interview with Bloomberg that there is a 20% to 30% chance the central bank raises its policy rate for a second straight meeting in October. In the overnight index swap market, the probability of an October hike stands at about 40%, with an additional increase by December fully priced in.

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