TOKYO: Japanese government bond (JGB) yields struggled for direction on Tuesday, as their US peers ticked up overnight while an auction for 10-year JGBs saw disappointing sales.
The 10-year JGB yield rose 0.5 basis point (bp) to 0.695% in the Asian morning, tracking US Treasury yields to pick up further from Thursday’s two-and-a-half month low of 0.635%.
It ticked down 1.5 bps to 0.675%, however, after the auction results were announced.
The bid-to-cover ratio at Tuesday’s auction, which compares total bids to the amount of securities sold, was 2.82, its lowest since October 2021.
The lower the number, the lower the demand.
The results suggest that a yield hovering around 0.7% “is not very attractive for bond investors” as they considered factors such as further reductions to the Bank of Japan’s (BOJ) bond purchases and the timing of a possible exit from ultra-loose monetary policy, said AXA Investment Managers fixed income strategist Ryutaro Kimura.
Domestic economic data out on Tuesday showed Tokyo core consumer inflation, considered a leading indicator of nationwide trends, rose 2.3% in November from a year earlier, remaining above the BOJ’s 2% target, but down from a 2.7% increase in October.
JGB yields rebound after two-year bond auction sees poor demand
While some investors expect the BOJ could move as soon as January, Kimura said there were concerns about a slowdown in the global economy, as well as a weak GDP reading for Japan’s third quarter, creating some uncertainty.
The 20-year JGB yield ticked up to 1.450% before falling 0.5 bp to 1.435% after the auction.
Meanwhile, US Treasury yields rose overnight, with the 10-year yield up from three-month lows ahead of closely-watched employment data due this week, giving a slight boost to JGB yields.
The 30-year JGB yield inched up 0.5 bp to 1.670%. The five-year yield rose 0.5 bp to 0.260%.
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