Long-dated Japanese government bonds advanced on Thursday, with the 30-year yield hitting its lowest level in more than five years, as the prospects of the global economy slowing further nudged investors to the perceived safety of debt. Data released in the United States the previous day added to the gloom hanging over the global economy. Weekly US jobless claims rose above economists' forecasts to a 26-year high.
The JGB yield curve flattened as demand for long-dated bonds held up after last week's interest rate cut and other easing measures by the Bank of Japan. The central bank cut interest rates to 0.10 percent from 0.30 percent on Friday and announced a range of steps to help an economy in recession.
Among the measures the BoJ introduced was an increase in the amount of JGBs it buys outright from the market to 1.4 trillion yen per month from 1.2 trillion yen. The BoJ also said it will start buying 30-year JGBs as a part of its outright purchases, which was a positive surprise for some participants. The 30-year yield dropped 2 basis points to 1.855 percent after hitting 1.845 percent, the lowest since August 2003.
The 20-year yield fell 1 basis point to 1.820 percent. The spread between the 20- and 30-year yields was well above 10 basis points a week ago but has fallen to a single digit this week.
Thin market conditions exacerbated JGB market moves on Thursday, with many market participants sidelined ahead of the year-end and with other major markets closed for the Christmas holidays. March 10-year JGB futures dipped 0.06 point to 139.70. The benchmark 10-year yield rose 1 basis point to 1.215 percent. The five-year yield climbed 1.5 basis points to 0.735 percent, and the two-year yield edged up 1.5 basis points to 0.410 percent.
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