TOKYO: Japanese government bond prices weakened across the board on Wednesday, with the benchmark yield hitting an eight-month high, as the market crumbled from the short-end on a lingering impact from a poor five-year auction the previous day.
The short to mid-term maturities underperformed, as bearish sentiment from weak sales at Tuesday's five-year auction was amplified by lacklustre results from the Bank of Japan's regular bond-buying operation.
The two-year yield and the five-year yield touched 9-1/2-month highs of minus 0.120 percent and minus 0.075 percent, respectively.
"Gloom still lingers after yesterday's five-year sale. The auction did not draw strong demand amid receding expectations for further BOJ easing," said Soichi Takeyama, a rates strategist at SMBC Nikko Securities.
"Foreign players also dominate the JGB midterm maturities, and Treasuries may have become more attractive from their view following the recent rise in their yields."
Treasury yields soared to 11-month peaks this week on speculation that U.S. President-elect Donald Trump would launch a massive fiscal package funded by debt.
The benchmark 10-year JGB yield was up half a basis point at 0.005 percent after touching 0.015 percent, its highest since March. It has climbed from around minus 0.090 percent seen a week ago, pulled up by the surge in Treasury yields.
Market focus was on how much further the 10-year JGB yield could rise before prompting action by the BOJ, which launched an yield curve control scheme in September in a bid to keep the benchmark yield around zero percent.
Super long JGB yields fared a little better, their yields dipping on bargain hunting by investors who scooped up the bonds after their yields rose to their highest levels since September. The 30-year yield fell 1 basis point to 0.560 percent.
Also putting further pressure on JGBs on Wednesday was a rise for Tokyo's Nikkei to its highest level since February, thanks to a weaker yen.
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