Japan 10-Year Yield May Return to 1% After Rally Fails: Technical Analysis

Japan’s 10-year bond yield may fall back toward 1 percent after failing to rise above the key 1.2 percent level, according to Mizuho Investors Securities Co.

Yields on the benchmark security averaged 1.273 percent in the 12 months to June 22, when they broke through 1.2 percent, and continued to a seven-year low of 0.895 on Aug. 25. The yield rebounded after that to 1.195 percent on Sept. 6.

“If the yield stops before reaching 1.2 percent, it will likely fluctuate between 1 percent and 1.2 percent for the time being,” said Akihiko Inoue, chief strategist at the unit of Japan’s second-largest banking group. “Once the 1.2 percent support line is breached, it’s difficult to climb above it.”

Ten-year debt auctions in the past year saw coupons set at 1.3 percent six times, 1.4 percent three times, 1.1 percent twice and at 1 percent once, according to the strategist. The coupon has never been set at 1.2 percent, making it a key level that helps determine the direction of the bond market, he said.

The 10-year rate was at 1.13 percent as of the 11:05 a.m. morning close at Japan Bond Trading Co., the nation’s largest interdealer debt broker.

Yields will likely consolidate at about 1.1 percent in the near term, Inoue said. Should the 1.2 percent level be breached on the upside, yield gains may accelerate and reach the late- March high of 1.4 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: Saburo Funabiki in Tokyo at sfunabiki@bloomberg.net.

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