Japanese Bonds Decline on Rate Bets – Asia Market Wrap

Japanese government bonds and stocks fell as bets on interest rate hikes increased, while equities in the rest of Asia were divided.

Traders interpreted Governor Ueda’s comments on Tuesday as hawkish, causing the Nikkei 225 index to fall 1% and Japan’s 10-Yr sovereign yield to briefly rise by more than 10 basis points. The yen strengthened against the dollar.

While the S&P 500 and Nasdaq 100 closed at all-time highs for the second day in a row, sentiment in the region has been muted. While Asia is expected to benefit from the Federal Reserve’s anticipated easing, some corners of Wall Street are beginning to question their forecasts as swaps traders in the United States reign bets on a March rate cut.

In Japan, swap markets are pricing in a 58% chance of a 25 BPS rate increase by the BoJ in April, compared with 44% at the end of last week.