Benchmark Japanese government bond yields sank on Tuesday as robust demand at an auction of the securities added to pressure from lower US Treasury yields.
The 10-year JGB yield dropped 2.5 basis points (bps) to a one-week low of 1.035% as of 0500 GMT.
Measures of demand improved markedly at the sale of 2.6 trillion yen ($16.64 billion) of the notes, with the bid-to-cover ratio rising to 3.66 from 3.15 at the previous auction last month.
Meanwhile, equivalent US Treasury yields continued to wallow near the two-week trough reached overnight after more weak macro data boosted bets for Federal Reserve policy easing this year.
Japan’s benchmark yield reached a 13-year peak of 1.1% on Thursday, owing to both a climb in overseas yields and building bets for some kind of hawkish policy shift, or a sign of one being imminent at the Bank of Japan’s two-day meeting ending June 14.
The BOJ raised rates for the first time since 2007 in March, and last month unexpectedly cut the amount of bonds it offered to buy at a regular purchase operation.Read more
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“The firm outcome of the auction may slow down fast-pitched rises in yields, but the fundamental issue - which is the future direction of the Bank of Japan’s regular bond buying amounts - remains unclear,” said Takahiro Otsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
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“That will cap gains in bond prices at least until the BOJ’s policy meeting this month.”
Benchmark 10-year JGB futures rose 0.28 yen to 143.44.
The two-year JGB yield fell 1.5 bps to 0.385%, and the five-year yield slid 2.5 bps to 0.605%.
The 20-year yield and 30-year yield ease lost 1 bp to 1.870% and 2.235% respectively.
