TOKYO: Japanese government bond prices skidded on Friday, pushing the benchmark yield to a one and a half-week high in line with slumping Treasuries after this week's confirmation from Federal Reserve Chairman Ben Bernanke that the US central bank could taper its stimulus later this year.
"A drop in risk appetite on expectations of less easy money from the Fed is pressuring equities, but providing no support for fixed income today," said a fixed-income fund manager at a Japanese trust bank in Tokyo.
"Still, JGBs haven't sold off as much as Treasuries, because of different supply/demand conditions," he said.
Diverging monetary policy outlooks between the Fed and Bank of Japan and could push the spread wider between Treasuries and JGBs and lead to a weaker yen, he added.
Bernanke said on Wednesday that the economy is improving enough for the Fed to begin scaling back its monthly $85 billion in asset purchases. His remarks helped push the benchmark 10-year US Treasury yield to 2.471 percent, the highest intraday level since August 2011, according to Reuters data.
The 10-year JGB yield rose 4 basis points to 0.875 percent after trading as high as 0.890 percent, its highest since June 12, but still within the 0.800 to 0.900 percent range in which it has traded for the past three weeks.
Ten-year JGB futures withered 0.49 point to 142.09 by the end of morning trade, dipping as low as 141.80 at one point, their lowest since May 30.
The superlong tenor also came under pressure, with both the 20- and 30-year yields climbing to fresh one-month highs. The 20-year yield rose 2 basis points to 1.750 percent, and the 30-year yield also added 2 basis points to 1.880 percent.
The spread between the 10-year and 20-year JGB yields widened to 89.5 basis points to a six-week high.
Japanese long-term interest rates are not necessarily spiking when seen from a long-term perspective, Vice Finance Minister Shunichi Yamaguchi said in parliament on Friday.
He also expects the BoJ will respond appropriately to any bond market volatility with flexible market operations.
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