Tokyo —Japanese government bond yields fell on Friday to their lowest levels since July, according to Investing.com, as a global selloff in artificial-intelligence stocks pushed investors out of equities and into safe assets. The Nikkei 225 was down 6.09 percent at 57,361.46 as of 06:22 GMT.
The bond rally was under way before Friday’s session opened. Ministry of Finance data show the 10-year JGB yield closed Thursday at 2.806 percent, down 4.9 basis points from 2.855 percent on Wednesday. Longer maturities moved more: the 30-year yield fell 6.4 basis points to 3.915 percent and the 40-year yield fell 6.1 basis points to 3.929 percent. The two-year yield dropped 3.1 basis points to 1.86 percent. Bloomberg reported a further rally in Japanese bonds on Friday as the global risk-off move lifted demand for havens. The ministry’s official closing levels for Friday had not been published at the time of writing.
The latest leg of the selloff started in New York. On Thursday the S&P 500 fell 4.36 percent to 7,353.73 and the Nasdaq Composite dropped 5.52 percent to 24,315.00, while the Cboe Volatility Index jumped to 28.18 from 16.61. The 10-year Treasury yield fell 5.7 basis points to 4.837 percent. In Tokyo, the Nikkei touched an intraday low of 56,745.81 on Friday, and its level as of 06:22 GMT was about 19 percent below its Oct. 6 close of 70,683.98.
The move in bonds matters for the Bank of Japan, which had been receiving data that support further tightening. Average wages rose in September at the fastest pace in 29 years, and real wages increased for a ninth straight month, according to Investing.com reports on government data published Friday. According to its website, the BOJ last changed its guideline for money market operations at its Sept. 18 meeting. At its Oct. 30 meeting it issued a decision on the pace of its sales of exchange-traded funds.
So far the bond market’s reaction says more about demand for safety than about a reassessment of the central bank. Two-year yields are the most sensitive to policy expectations, and Thursday’s decline at that end of the curve was smaller than the drop in 10-year to 40-year yields. A sharper fall in short-dated yields would suggest that traders expect the equity rout to delay the BOJ’s next move.
Prime Minister Takaichi said the government was monitoring markets closely and would concentrate on supporting the economy, Reuters reported on Friday.
In currencies, the yen moved less than stocks or bonds. Investing.com reported early on Friday that the yen gained as the equity rout weighed on risk appetite, but by 06:37 GMT the dollar was up 0.15 percent at 157.885 yen, within a session range of 157.249 to 158.008. The pair has stayed between about 156.5 and 158.5 yen over the past month. The yield gap behind yen-funded carry trades remains wide: at Thursday’s closes, the 10-year Treasury yield was about 203 basis points above the 10-year JGB yield. If a prolonged flight to safety pulled US yields down faster than Japanese yields, that spread would narrow and cut returns for investors who borrow in yen to buy higher-yielding assets. Investing.com also reported that Japanese investors bought foreign long-term bonds as tech stocks fell.
Three things to watch next: the US October jobs report, which the Bureau of Labor Statistics releases on Friday at 8:30 a.m. Eastern time, according to CNBC; Japan’s third-quarter GDP report, where a Reuters poll reported by Investing.com points to a sharp slowdown in growth; and the Ministry of Finance’s closing yields for Friday, which will confirm how far the rally went.
