US economy

Japan’s 10-Year Yield Climbs to Zero for First Time Since March

(Bloomberg) — Japan’s 10-year bond yield rose to zero for the first time in nine months amid waning global demand for debt.

The nation’s benchmark yields are rising for a fourth month after the Bank of Japan slashed debt purchases and refrained from adding any more easing measures. Bonds have also fallen as optimism that the U.S. and China may reach a partial trade deal sapped demand for haven assets.

Japan’s 10-year yield climbed 1.5 basis points to 0.0% on Tuesday, after being as low as minus 0.295% in September. Similar-maturity U.S. yields have bounced back about 40 basis points since hitting a three-year low of 1.43% that month.

“Investors aren’t confident there is ample demand for bonds in the markets,” said Souichi Takeyama, rates strategist at SMBC Nikko Securities Inc. in Tokyo. “If there is a risk of not being able to sell 10-year bonds in the market, the 10-year yield may not be confined to zero.”

Foreign demand and speculation that BOJ would deepen its negative rate have both been fading, contributing to the decline in yields, Takeyama said.

While the central bank stands pat on monetary policy, Japan’s government is stepping up its fiscal support.

Prime Minister Shinzo Abe last week announced a stimulus package worth around 26 trillion yen ($239 billion) spread over the coming years, seeking to revive the economy grappling with an export slump, natural disasters and the fallout from a recent sales tax increase.

“Ten-year bonds yielding zero should lure demand from domestic investors, likely limiting further upside in yields,” said Shuichi Ohsaki, chief rates strategist at Bank of America (NYSE:) Merrill Lynch in Tokyo.

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