Japanese government bonds fell on Tuesday, hurt by falling US Treasuries and as a rise in Tokyo stocks to a three-month closing high dented investor demand for debt. The yield curve steepened as midterm JGB yields climbed less relative to those of longer-dated maturities. The benchmark 10-year JGB yield rose on Tuesday after its US counterpart climbed to a four-month high the previous day.
The US 10-year yield advanced above 3.62 percent to a four-month high the previous day as a stronger near-term economic outlook favoured other assets like stocks, pulling the US two-year/10-year spread to a record high above 280 basis points. The 10-year JGB yield gained 3.5 basis points to 1.250 percent.
The five-year yield climbed 2.5 basis points to 0.445 percent after hitting a four-year low of 0.425 percent on Monday. The two-year yield was unchanged at 0.160 percent, slightly above a four-year low of 0.155 percent struck the previous week. The five-year yield dropped to its lowest since 2005 on Monday after the Bank of Japan heightened prospects of further monetary easing late last week.
The JGB two-year/10-year spread widened by 3 basis points to 109 basis points. The two-year/20-year spread widened by 2.5 basis points to 191.5 basis points, while the five-year/20-year yield was little changed on the day at around 162 basis points. March 10-year JGB futures fell 0.30 point to 140.02. The contracts hit 140.49 at the beginning of the month, their highest since April 2008. The 20-year yield climbed 3 basis points to 2.075 percent.