Japan bond yields extend gains on inflation concerns ahead of Fed decision

TOKYO: Japanese government bond (JGB) yields rose on Wednesday, extending gains as higher oil prices driven by the escalating Middle East conflict heightened inflation concerns ahead of the Federal Reserve's (Fed) interest rate decision.

Here are a few details:

The benchmark 10-year JGB yield rose 0.5 basis point (bp) to 3.035 per cent after hitting a fresh 30-year high on Tuesday. Yields move inversely to bond prices.

The 20-year JGB yield climbed 4 bps to 3.925 per cent. The 30-year yield added 4 bps to 4.190 per cent.

Oil prices hovered in the mid-US$100-a-barrel range after shipping industry sources said crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and Riyadh had cancelled some cargo deliveries to European customers.

Overnight, the yield on the benchmark US 10-year Treasury note rose to 5.004 per cent after climbing to 5.041 per cent, its highest since July 2007.

The Fed will announce its policy ‌decision at 2pm EDT (1800 GMT) on Wednesday following the end of a two-day meeting.

Financial markets are betting heavily that the U.S. central bank will lift its benchmark rate a quarter of a percentage point, to a 3.75 per cent-4.00 per cent range, and signal further tightening ahead.

At home, the Yomiuri newspaper reported that Prime Minister Sanae Takaichi is likely to retain Minoru Kiuchi as minister in charge of economic revitalisation in a cabinet reshuffle scheduled for Thursday.

Markets have been focusing on whether Kiuchi, an advocate of expansionary fiscal and monetary policy, would remain in his post for clues about whether the recent bond selloff might push Takaichi to rein in her spending plans. "In the bond market, many had viewed the possible replacement of Kiuchi as a buying factor, so some unwinding of those expectations could emerge today," said Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities.