Japan's 10-Year Yield to Decline Below 0.9% This Month: Technical Analysis

Japan’s 10-year bond yields are likely to fall to fresh seven-year lows, JPMorgan Chase & Co. said, citing trading patterns.

Since April, benchmark yields have dropped during the middle of each month, said Takafumi Yamawaki, chief rates strategist at JPMorgan in Tokyo. Ten-year yields tend to rise at the start of the month because demand wanes before key U.S. data and Japan’s 10-year bond auctions, he said. Buying of the debt rebounds after these events, according to Yamawaki.

“It’s highly likely that yields will fall below 0.9 percent by the end of this month,” he said.

Yields reached their highest in the first two weeks of every month since April, according to Bloomberg data. Yields reached their lowest in the last 10 days of each month.

There’s an average 15 basis-point difference between the highest and lowest yields in each month, Yamawaki said. Subtracting the spread from this month’s highest yield of 1.065 percent suggests that yields may reach 0.915 percent, he said.

A descending trendline connecting lows of 10-year yields since April falls below 0.9 percent in the latter half of August, according to Yamawaki.

“It wouldn’t be surprising if yields briefly slid to around 0.88 percent,” he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Nobuyuki Akama in Tokyo at akam@bloomberg.net.

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