BNY’s Bob Savage highlights a strong JGB auction and falling yields as markets price a 76% chance of a Bank of Japan (BoJ) rate hike this month. Despite this, USD/JPY remains near 160 for a fourth day, with Japanese officials issuing repeated intervention warnings. The tension between domestic tightening expectations and FX stability concerns keeps the pair in focus.

Rate hike odds versus weak Japanese Yen

"Japan’s 10y government bond auction saw a 3.53 bid/cover, better than the 3.35 average, pushing yields down 11bp to 2.57%."

"This has taken the market back down from its level matching 1996’s highs."

"Tomorrow’s speech by Kazuo Ueda of the BoJ will be key in sustaining the JGB gains today, with the market pricing in a 76% chance of a BoJ hike this month."

"At the same time, JPY continued to trade close to 160 to the USD for a fourth day in a row, despite ongoing warnings of intervention from Finance Minister Satsuki Katayama."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)