Japan’s 10-year bond yield falls to near 2-week low after firm auction result

TOKYO: Japan’s 10-year government bond (JGB) yield fell to a near-two-week low on Wednesday as a stronger-than-expected outcome of a 30-year bond auction in the previous session lifted investor sentiment across the curve.

The 10-year JGB yield fell 3 basis points (bps) to 0.575%, its lowest since July 28, when the Bank of Japan (BOJ) raised its de-facto ceiling of the benchmark bond yield to 1%.

“The auction for 30-year bonds received firm demand, which affected yields across the curve,” said Naoya Hasegawa, senior bond strategist at Okasan Securities.

Investors found the outcome of the auction for 30-year notes stronger-than-expected, with its bid-to-cover ratio - which compares total bids to the amount of securities sold - rising to the highest since January 2022.

“Also the sentiment improved after investors found the fair value of the 10-year bonds at around 0.65%,” said Hasegawa.

The 10-year bond yield started falling after hitting 0.655% last Thursday, a level not seen since January 2014.

The BOJ on that day conducted emergency bond buying to contain elevated yields.

Japan’s 10-year bond yield falls amid supply shortage

The BOJ conducted its regular bond-buying operation on Wednesday, keeping the amounts on offer at the same level as the previous operation across the curve.

The 20-year JGB yield fell 4 bps to 1.245% and the 30-year JGB yield fell 3.5 bps to 1.515%, their lowest since July 31.

The 40-year JGB yield fell 4.5 bps to 1.680%.

The two-year JGB yield fell 0.5 bp to 0.005%.

The five-year yield fell 1.5 bps to 0.175%.

Benchmark 10-year JGB futures rose 0.38 yen to 147.1, with a trading volume of 12,671 lots.