Yield Curve in Japan to Flatten as Interest Rates Rise, Credit Suisse Says

(Bloomberg) -- Japan's two-year bonds may slump, closing the gap in yields with 20-year debt to the lowest in almost four years, because the central bank will probably raise interest rates in August, Credit Suisse Group said.

The spread that forms the so-called yield curve may drop to 120 basis points in the next two months, a level unseen since July 2, 2003, from 127 basis points now, said Akito Fukunaga, a fixed- income strategist at Credit Suisse. The Bank of Japan is likely to increase borrowing costs in August to 0.75 percent after upper house elections in July, he said.


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