Japan bond yield curve twist-steepens ahead of Fed decision

TOKYO: Japan’s government bond yields moved in opposite directions on Wednesday, as fiscal concerns and higher oil prices fuelled inflation worries ahead of the US Federal Reserve’s policy decision. The yield curve, which tracks borrowing costs across different bond maturities, twist-steepened as yields on five- and 10-year bonds declined while those on superlong maturities rose. The benchmark 10-year JGB yield fell 1 basis point to 3.020%, after hitting a 30-year high in the previous session. The five-year yield dropped 1.5 basis points to 2.295%. Bond yields move inversely to prices. The 20-year JGB yield climbed 2 bps to 3.905%, after touching a three-decade high of 3.925%. The 30-year yield added 4 bps to 4.190% while the yield on the 40-year JGB, Japan’s longest tenor, rose 1 bp to 4.22%. Bloomberg News reported on Tuesday that Tokyo was considering defence spending worth 3.5% of gross domestic product in the medium term. The report “likely had a significant impact” as the market appeared to have taken it as raising the prospect of fiscal expansion and, in turn, higher JGB yields, said Hiroshi Namioka, chief strategist at T&D Asset Management. “The yen has also started to weak