JGBs ease slightly as Nikkei manages to rise after Christmas rout

Madiha Shakeel December 26, 2018

TOKYO: Yields on Japanese government bonds (JGBs) edged broadly higher on Wednesday, in line with equities, as investors re-established positions after the previous session’s rally.

The yield on benchmark 10-year JGBs was flat at 0.010 percent, after falling as low as zero percent for the first time since September 2017 on Tuesday.

Japan’s benchmark Nikkei share average, which plummeted into bear market territory the previous day, ended higher after seesawing on Wednesday, helped by short-covering.

Longer maturity bond yields rose slightly, but gains were capped as worries about slowing global growth and the troubled political outlook in the United States continued to weigh on investor sentiment.

The 20-year yield gained half a basis point to 0.510 percent, while the 30-year yield and the 40-year yield were each up 1 basis point, to 0.715 percent and 0.845 percent, respectively.

Ten-year JGB futures ended 0.13 points lower at 152.39, with a trading volume of 28,208 lots.

Yields on shorter maturity JGBs were also a tad higher.

The two-year yield was 2 basis points higher at minus 0.130 percent and the five-year yield gained 1.5 basis points, also trading at minus 0.130 percent.

Wednesday’s auction of 2.1 trillion yen ($19.02 billion) of two-year debt attracted reasonable demand, largely in line with market expectations.

The tail – the difference between the average and lowest accepted auction price with a low figure representing steady demand – was at 0.04 yen, up slightly from 0.03 yen from the previous sale last month.

The bid-to-cover ratio, a gauge of demand, came in at 5.36, higher than the 4.66 times the amount offered of last month’s auction.

Copyright Reuters, 2018

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