Intriguing RV graphs: JGB market after September rate hike【 Fixed Income Commentary 】

Key arguments

• JGB yields, led by the 10-year sector, rose after the Takaichi Cabinet formed on concerns the BoJ was falling behind the curve, and the 2s10s spread widened rather than flattening as a textbook hike would suggest.
• The reversal was triggered by coordinated US-Japan yen-buying intervention in late July and a series of Bessent remarks seen as pressuring the BoJ to accelerate hikes.
• TONA/OIS pricing shifted from roughly one hike every six months to a pace approaching one hike per quarter, broadly in line with other major countries.
• Whether the reversal continues depends on the BoJ actually accelerating hikes; the September 17-18 meeting, vote counts and Ueda's tone are the key tests, and if Ueda accepts quarterly-pace pricing, the 2s10s spread should keep narrowing.

Corresponding source evidence

1. Until now, JGB yields had been rising, particularly the 10-year sector (Graph 1), mainly driven by concerns over the risk that the BoJ could fall behind the curve.
2. A rise in market participants’ inflation expectations (10-year BEI [break- even inflation rate]), on the back of the view that the BoJ will continue to hike its policy interest rate at a gradual pace, have been driving up JGB yields (Graph 1, 2).
3. As we pointed out in our August 10, 2026 Fixed Income Commentary (“Intriguing RV graphs: Revisiting relationship between JGB yields and exchange rates”), Japan falling into a spiral of rising inflation expectations and yen depreciation may also have contributed to the higher JGB yields around the 10- year zone (Graph 1, 2). · 2026