TOKYO: Japanese government bond yields (JGB) fell on Friday as expectations of an early shift in the Bank of Japan’s monetary policy faded after a powerful earthquake on New Year’s Day, casting a shadow on the economic outlook.
The 10-year JGB yield fell 1.5 basis points (bps) to 0.6%.
The 20-year JGB yield toppled 2 bps to 1.355% and the 30-year JGB yield declined 3 bps to 1.610%.
“Expectations of a BOJ policy shift at its January meeting were already low but faded further after the quake, dimming the outlook for the economy as well as a rebound in overseas tourists,” said Ataru Okumura, a senior strategist at SMBC Nikko Securities.
Monday’s magnitude 7.6 earthquake has killed more than 90 people in the country’s Hokuriku region, which is home to some tourist sites, and destroyed infrastructure, leaving homes without power.
The yields also fell ahead of the Ministry of Finance’s auctions for the 10-year bond auction next Wednesday and another for 30-year notes on Friday.
Japan’s longer-end bond yields jump as weak auction triggers selling
“Investors want to buy bonds before prices rise, and depending on the outcome, the demand may increase after the auctions,” said Keisuke Tsuruta, a senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
The positive outcome of a liquidity enhancement auction for bonds with between one- and five-year maturities aided sentiment, pushing the yields lower, Tsuruta said.
The five-year yield fell 1.5 bps to 0.195% and the two-year JGB yield dipped 1 bp to 0.035%.
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