TOKYO: Japanese government bond prices gained on Wednesday, with the benchmark 10-year yield slipping to a three-month low as Japanese and global shares tumbled from recent highs on uncertainty over the Federal Reserve's policy.
The benchmark 10-year JGB yield dropped 2.0 basis points to 0.760 percent, its lowest level in three months and piercing a bottom of 0.770 percent hit twice in recent weeks.
Speculators such as commodity trading advisors were buying JGB futures while selling stock futures, as the Japanese yen also strengthened as a fall in world shares stoked risk-off sentiment, traders said.
In addition, the bond market also has been helped by recent falls in repo rates, which market players say reflect the accumulative impact of the Bank of Japan's massive asset purchases since April.
The overnight repo rate starting the next business day fell to a two-month low of 0.063 percent, moving away from its usual levels around 0.10 percent.
"Because the BOJ has been buying so many short-term bills, brokers have a limited inventory of bills. Their inventory is notably lower than before the BOJ's quantitative easing," said Akito Fukunaga, chief rates strategist at RBS.
"That is certainly making investors buy longer-dated bonds at lower yields," he added.
But market players also said price actions in JGBs as well as in Japanese stocks are likely to be exaggerated by thin trading volume due to the summer lull.
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