#Japan5YearYieldHitsRecordHigh

#Japan5YearYieldHitsRecordHigh
Japan 5 Year Yield Hits Record High
Core Move
• Japanese government bond yields were largely unchanged on Thursday, with the five-year yield hovering near a record high as investors positioned for a potential Bank of Japan rate hike in September • Japan five-year government bond yields touched a record high on Friday at the end of a volatile week of trade, as investors gauged government and central bank responses to economic headwinds brought on by the Middle East crisis
• Yield on the five-year Japanese government bond rose 1.5 basis points to 1.84 percent, the highest on record
• Yield on five-year Japanese government bonds climbed to a new record high on Friday, as escalating US Israeli war on Iran fuelled inflation concerns and strengthened expectations of faster interest rate hikes by major central banks
• Five-year yield rose 3 basis points to 1.770 percent, while benchmark 10-year JGB yield rose 3 bps to 2.300 percent
• Five-year yield was unchanged at 2.105 percent. It rose to a record high of 2.12 percent in previous session
• Five-year yield reached as high as 2.170 percent during same move that pushed 10-year JGB to 2.930 percent
Why 5 Year Record Matters
1. BOJ Hike Pricing Five-year near record high shows market bracing for BOJ September rate hike. Two-year yield most sensitive to Bank of Japan also jumped 4.0 basis points to 1.690 percent, while five-year reached 2.170 percent. Shorter dated 2-year yields surged to three-decade highs, while 5-year yields climbed to record levels
2. Inflation and Iran War Impact Middle East crisis drives inflation bets and stimulus bets. Iran war drives inflation, stimulus bets and inflation concerns strengthened expectations of faster interest rate hikes. Volatile week of trade with investors gauging government and central bank responses to headwinds brought on by Middle East crisis
3. Fiscal Health Concern 10-year government bond yield rose to around 2.18 percent, reaching highest level since 1999, while 5-year yield hit record highs amid mounting concerns over country fiscal health. Moves came ahead of Ministry of Finance planned sale of roughly 2.5 trillion yen in 5-year securities, raising worries about debt funded spending
4. From 15 Year High to All Time High Journey Earlier five-year government bond yield hit 15-year high as weaker yen accelerated bets for Bank of Japan to raise rates. Five-year yield rose to 0.685 percent, highest since November 2009, before inching down. Historically 5 Year Note Yield reached all time high of 1.61 in July 2007. Now levels at 1.77, 1.84, 2.105, 2.12, 2.170 show record break above historic ceiling
5. Broad Curve Shift Benchmark 10-year JGB yield touched 2.930 percent, highest since September 1996, fresh three-decade high on growing rate hike bets. 10-year rose to around 2.32 percent for second straight session amid growing expectations of near term rate hike from Bank of Japan. 10-year at 2.18 percent highest since 1999. Entire curve repricing, with 5-year leading record narrative

Market Implication
• 5-year at 1.84 percent to 2.12 percent record signals end of ultra low Japan era
• Weaker yen plus inflation plus fiscal concerns push BOJ to faster tightening priced in 2-year and 5-year
• JGB supply heavy with 2.5 trillion yen 5-year sale adds pressure on yields to hold near highs
• Global spillover as Bund and Treasury yields also rise on German producer prices surge and US Israel Iran inflation shock
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