On Wednesday, longer dated US Treasury yields are down 2 basis with the 10-year and 30-year at 1.71% and 2.45%, respectively.
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Markets were also shut for holidays on Friday in China, Hong Kong, Malaysia and South Korea. The past week’s data included retail sales falling by more than expected last month and producer prices, a sign of future inflation, unchanged.
The week’s big anxiety that the low interest rate and mass money printing tactics of the major central banks might be losing their potency looked like it had been put on hold, however.
“We’ve seen a battle in the yield curve in recent weeks”, said Robert Tipp, chief investment strategist at Prudential fixed income.
The 30-year JGB yield rose to a six-month high JP30YTN=JBTC while the 20-year JGB yield rose to 0.495 percent, a level last seen in March.
Futures traders are now pricing in a 12-percent chance of a rate increase this month, down from 15 percent on Wednesday, according to the CME Group’s FedWatch tool.
Global equity prices yesterday gained after a mixed bag of U.S. economic data dimmed chances the Federal Reserve will raise interest rates next week.
Investors are anxious that central banks in Japan and Europe may decide to reduce, or temper their extreme monetary stimulus policies amid mounting evidence that they have failed to bolster either growth or inflation.
Stock markets as well as the USA dollar swung wildly on comments from both members, but given the recent set of disappointing economic data from the United States in the past couple of weeks, investors and analysts now do not expect the Federal Reserve to increase interest rates in their policy meeting next week.
While the BOJ is widely expected to combine a cut in short-term rates with an attempt to steepen the yield curve, possibly by making its bond buying target more flexible, in its next easing, market players say uncertainty surrounding its policy meeting on Sept 20-21 is unusually large.
The yen climbed 25 percent against the dollar in the year up to June, when the safe-haven currency hit a two-and-a-half year high of 99 yen per dollar in the aftermath of Britain’s shock vote to leave the European Union.
The BOJ will also consider reducing purchases of super-long government bonds to give financial institutions such as insurers and pension funds a better environment for earning returns, the sources said.
Despite the widespread criticism of the negative interest rate policy from Japanese banks and insurers, the article said that “the BoJ policy board is expected to conclude in the review that the benefits of the negative rate announced in January outweigh the side effects”.
The SNB warned that significant risks remained after sticking with its ultra-loose monetary policy and currency intervention, while the BoE said it was still likely to cut interest rates to just above zero this year. Movements in major currencies were confined to relatively narrow ranges with a wait-and-see mood prevailing ahead of the September 20-21 Fed and Bank of Japan policy meetings.
The yen gained 0.2 percent to 101.84 per dollar, putting it up 0.7 percent for the week.
The euro was also flat for both Friday and the week at $1.124.
On Wednesday, yields on eurozone bonds were already starting to fall again as investors speculated that the European Central Bank will eventually be forced to provide more stimulus to lift the stubbornly low inflation rate.
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Both Brent crude and US crude retreated 0.5 percent to $46.35 and $43.68 a barrel, respectively. However, data in recent weeks have shown signs of weakness, including the ISM surveys showing a decline in new orders and production in US factories in August and service sector activity at a six and a half year low. Elsewhere, the Australian dollar inched up 0.1 percent to $0.7520 after posting a 0.7 percent gain on Thursday. Spot gold was last trading at $1,314.64 an ounce, down about one per cent for the week.
