JGBs skid, benchmark yields hit highest in more than 2 months

TOKYO: Japanese government bonds slipped on Wednesday, with 10-year futures dropping the most since late September and yields on benchmark cash bonds hitting highest since October, after the Bank of Japan trimmed its bond buying.

While the central bank's move in the previous session was a technical tweak in line with its policies to date, it triggered market speculation that the BOJ could be poised to begin winding down its massive stimulus.

The benchmark 10-year JGB yield rose 1.5 basis points to 0.080 percent, its highest level since Oct. 23.

The 10-year JGB futures contract ended down 0.28 point at 150.35, its biggest drop since Sept. 28. Some 36,616 contracts were traded, its highest volume since Dec. 21.

"There are many overseas players active in the futures market, and I don't know whether they fear future BOJ action or not," said Keiko Onogi, a senior JGB strategist at Daiwa Securities. "I think more overseas investors are worried about BOJ action than domestic investors."

In the superlong zone, the 20-year yield was 1 basis point higher at 0.595 percent, its highest since Nov. 1, while the 30-year yield was up 1.5 basis points at 0.845 percent, its highest since Dec. 6.

Also weighing on JGBs, yields on 10-year U.S. Treasuries scaled 10-month peaks, due in part to the BOJ's action.

A decent 10-year auction provided some support to JGBs. The Ministry of Finance offered 2.3 trillion yen ($20.47 billion) of 10-year JGBs with a 0.10 percent coupon, and some 65.5523 percent of the bids were accepted at the lowest price of 100.20.

The sale drew bids of 3.74 times the amount offered, slightly up from the previous sale's bid-to-cover ratio of 3.70 times.