Investors are ramping up their wagers that the Bank of Japan will continue raising interest rates, pushing the yield on Japan's two-year government bonds toward the closely watched 2% threshold.
This yield, which is particularly sensitive to monetary policy expectations, climbed as much as 4 basis points to 1.975% on Monday, marking its highest level since 1995.
Other maturities also came under pressure, with the five-year government bond yield rising 3 basis points to 2.43%.
The move stems from investor concerns that the Bank of Japan may be falling behind the curve.
After the widely anticipated rate hike earlier this month was implemented, BOJ Governor Kazuo Ueda offered limited guidance on the pace of further tightening.
This has led markets to expect that policymakers may ultimately need to raise rates more aggressively, especially as a hawkish Federal Reserve is likely to keep the U.S.-Japan interest rate differential elevated.
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