JGB yields fall on bets BOJ to keep rates steady
TOKYO, Dec 18 (Reuters) -Japanese government bond yields fell on Wednesday, reversing rises in the previous session, as investors bet the Bank of Japan (BOJ) will keep the interest rates steady at its latest meeting.
The 10-year JGB yield JP10YTN=JBTC fell 1 basis point (bp) to 1.065%.
The BOJ will conclude its final policy meeting for the year on Thursday, with its decision due to be announced just hours after the Federal Reserve's expected interest rate cut.
"The yields rose too much in the previous session. Because the market expected the BOJ to keep the interest rates steady, they bought back bonds," said Miki Den, senior Japan rate strategist at SMBC Nikko Securities.
JGB yields rose on Tuesday as a weaker yen drove bets for the rate increase this month.
There is speculation that the BOJ may keep the rates steady at its January meeting and such bets supported the yields, said Naoya Hasegawa, chief bond strategist at Okasan Securities.
"Some market players wonder how the BOJ can justify raising rates in January if it holds the rates steady this month," Hasegawa said.
But the slow pace of the policy shift will weaken the yen, which may prompt the BOJ to raise rates, he said.
Swap rates indicated a 17.6% probability of the BOJ raising rates by a quarter-point on Thursday and 61.3% chance in January, compared to a 70% chance for the January hike earlier this month. 0#JPYIRPR
The two-year JGB yield JP2YTN=JBTC fell 0.5 bp to 0.585% and the five-year yield JP5YTN=JBTC fell 1 bp to 0.72%.
The 20-year yield JP20YTN=JBTC fell 1.5 bps to 1.87% and the 30-year yield JP30YTN=JBTC fell 3 bps to 2.265%.
The 40-year yield JP40YTN=JBTC fell 3.5 bps to 2.63%.
Reporting by Junko Fujita; Editing by Varun H K
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