Japanese government bond prices were steady on Friday, shrugging off an overnight drop in US Treasuries, after solid two-year auction results underscored persistently strong demand for debt under the Bank of Japan's negative interest rate policy. Though the retreat by Treasuries capped JGBs, it had little impact on Friday's 2.3 trillion yen ($20.35 billion) two-year government debt auction. The bid-to-cover ratio, a gauge of demand, rose to 5.01 from 4.34 at the previous auction last month.
Dealers said the new two-year JGBs attracted demand from both domestic and foreign buyers. The benchmark 10-year JGB yield edged down half a basis point to minus 0.110 percent, nudging back toward a record low of minus 0.135 percent struck earlier this month. June 10-year JGB futures added 0.03 point to end at 151.89.
The 30-year yield slipped 1.5 basis points to 0.500 percent.
With the yield curve likely to remain near historic lows under the BOJ's negative rate policy, domestic investors have increasingly sought foreign bonds for better returns. Finance ministry data released on Friday showed domestic investors were net buyers of foreign bonds to the tune of 2.276 trillion yen last week, the largest amount on record stretching back to 2005. US Treasury yields ended higher in light trading overnight as the market continued to evaluate when the Federal Reserve could hike interest rates. St. Louis Fed President James Bullard said Thursday another rate hike "may not be far off.
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