Japan's 10-year yield tops 3% for first time since 1996 as Treasury chief presses for stronger yen

Japan's 10-year yield tops 3% as Treasury chief signals pressure on yen

Japan's benchmark borrowing costs rose to their highest level in three decades on Tuesday, with the 10-year government bond yield climbing 6 basis points to nudge above 3% for the first time since 1996, before moderating toward 2.99%, as reported by CNBC.

The move came as S. Treasury Secretary Scott Bessent signaled that he expects action from Tokyo and the Bank of Japan to support the yen, which has been sliding against the dollar. In a Monday interview with CNBC, Bessent said: "I have information that the market doesn't have. I have information that the Japanese government and the Bank of Japan are going to intervene."

A S. official told broadcaster NHK that Bessent emphasized the need for Japan to communicate its path toward fiscal sustainability and further rate hikes in separate meetings with Japanese Finance Minister Katsunobu Kato and Bank of Japan Governor Kazuo Ueda. Katayama told reporters that the S. and Japan had agreed to continue their coordinated effort to achieve "orderly" moves in the yen to ensure global market stability, and remained ready to act in response to "disorderly" market moves, according to Reuters.

The yen was last trading at 160 per dollar after weakening to that level earlier in the session, a level some traders see as increasing the likelihood of further currency intervention, CNBC reported. The S. and Japan conducted a rare joint intervention to support the yen in August, but the currency has since surrendered much of its gains.

Global bond sell-off intensifies

The rise in Japanese yields was part of a broader global bond sell-off. S. Treasury yields were broadly higher after a speech by Federal Reserve Chair Kevin Warsh was interpreted as hawkish by the market, CNBC reported. The Guardian also reported that expectations of higher interest rates were piqued by Warsh's Friday speech.

In the UK, long-term borrowing costs jumped to their highest level since early 1998 on Tuesday, with the yield on 30-year gilts hitting 5.89% as traders fretted about fresh increases in oil prices driving up inflation, The Guardian reported. Ten-year gilt yields were at their highest level since the global financial crisis of 2008.

The Guardian noted that higher yields progressively increase the cost of financing the government's debt, and if sustained these would pass through to the Office for Budget Responsibility's forecasts for the chancellor, John Healey, when he delivers his 28 October budget. The moves underline the tricky global backdrop facing Andy Burnham's government as it returns to Westminster promising to help consumers with the cost of living.

The bond sell-off was driven by international factors. The Guardian reported that Japanese 10-year yields hit their highest level since the 1990s amid expectations that the Bank of Japan will have to raise interest rates to control inflation. Investors also appeared to be responding partly to higher oil prices, which were up 1.7% at $92 after a fresh exchange of fire in the Iran conflict over the weekend.

Bond investors were also fretting about runaway deficits in the US, where the Trump administration is having to hand back much of the revenue from swingeing tariffs, The Guardian reported. Bessent has suggested the administration may have plans to cut spending, but no policy has yet been announced.

Finance ministers and central bankers from the G20 major economies are meeting in North Carolina to discuss the state of the global economy, The Guardian reported. Bessent, who chaired the G20 meeting of his peers, hinted afterwards that Japanese policymakers could be about to raise interest rates.