U.S. government debt yields rose on Monday, tracking a massive move in Japanese rates.
The yield on the Japanese 10-year note jumped more than 4 basis points Monday to its highest level since February following reports late last week that the Bank of Japan could adjust its monetary policy to make the program more sustainable.
The yield on the U.S. benchmark 10-year Treasury note followed suit, rising 7 basis points to 2.96 percent at 1:21 p.m. ET, while the yield on the 30-year Treasury bond up at 3.094 percent. Bond yields move inversely to prices.
The Bank of Japan is holding preliminary talks on making changes to its interest-rate targeting and stock-buying techniques, sources told Reuters. Any such shift would come years after BOJ Governor Haruhiko Kuroda started a massive bond buying initiative in 2013 to help eradicate deflationary pressures and buoy prices.
"Although [the Bank of Japan] tried to really make clear this wasn’t a tightening policy, the market looked at it as another step away from easy money," said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research. "The idea that their yields would go up — albeit from nothing to 7 basis points — that really spooked the markets."
The central bank has been gradually reducing its bond buying since September 2016, but remains one of the most lax in terms of quantitative easing. Japan's inflation is seen as unlikely to top the BOJ's target of 2 percent despite aggressive bond purchases.