TOKYO: Japanese government bond (JGB) yields inched up on Monday as investors turned cautious ahead of an auction for the 20-year bond due on Tuesday.

The auction comes after JGB yields slipped to multi-month lows last week, tracking US Treasury peers which continued to decline from 5% highs reached a month ago amid strengthening bets that the Federal Reserve’s rate hiking cycle is over.

The US 10-year note briefly hit a two-month low, but ticked up before Friday’s close. It was last steady around 4.45% during Asian hours.

The 10-year JGB yield rose 0.5 basis point (bp) to 0.755%, after touching a two-month low of 0.715% on Friday.

Benchmark 10-year JGB futures were at 145.68 yen, down from a Sept. 8 high of 146.06 yen hit on Friday.

While there were some adjustments to holdings after yields fell “a bit too much” last week, the main focus was Tuesday’s 20-year JGB auction, said Makoto Suzuki, senior bond strategist at Okasan Securities.

“There’s likely some selling going on due to caution ahead of the auction,” he said.

The 20-year JGB yield had dropped as low as 1.44% on Friday, a one-and-a-half month low.

The auction could run into some trouble if the yield drops to the low 1.4% range again, but if it holds around 1.5%, there should be passable demand, Suzuki said.

JGB yields tumble to multi-month lows tracking US peers

The 20-year JGB yield was last up 1 bp at 1.485%.

Last month’s 20-year JGB auction saw weaker-than-expected results as investors attempted to size up rapidly changing market dynamics - including the conflict in Gaza - ahead of the Bank of Japan’s October monetary policy meeting.

Elsewhere on the superlong end, the 30-year JGB yield ticked up 1 bp to 1.685%. Meanwhile, the two-year and five-year yields were flat at 0.04% and 0.315% respectively.