TOKYO: Japanese government bond yields rose on Wednesday as a poorly received auction of 40-year debt left investors unsettled, who were already cautious ahead of a crucial Bank of Japan policy meeting next week.
The 40-year JGB yield rose 3.5 basis points (bps) to 2.460%, with a measure of demand at the auction falling from the previous sale in May.
The 10-year JGB yield added 1 bp to 1.070%.
Benchmark 10-year JGB futures closed the session down 0.1 yen at 142.8 yen. Yields rise when prices fall.
The BOJ will set policy on July 31, and has already flagged it will announce a “significant” reduction to its monthly bond purchases at the meeting. Speculation is rising that the central bank may also raise interest rates the same day, following comments from some high-profile politicians supportive of higher borrowing costs.
A Reuters poll of economists conducted earlier this month showed more than three quarters of respondents expected the BOJ to forgo a rate hike this time.
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“Sentiment in the JGB market has been weak since last week, as the BoJ’s meeting is right ahead,” said Norihiro Yamaguchi, senior Japan economist at Oxford Economics.
“The uncertainty itself has investors avoiding new entry into the market.”
The 30-year JGB yield advanced 2 bps to 2.195%, while the 20-year yield rose 0.5 bp to 1.860%.
The two-year yield gained 1 bp to 0.360%. The five-year yield added 1.5 bps to 0.615%.
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