TOKYO: Japanese government bond (JGB) yields struggled for direction on Tuesday, as the Bank of Japan’s chief gave no clues on the timing of future rate hikes, while an auction for five-year bonds saw fair demand.
Yields, which move inversely to bond prices, largely moved in a tight range, as BOJ Governor Kazuo Ueda on Tuesday again signalled scope for reducing monetary stimulus if inflation continues to accelerate.
The benchmark 10-year JGB yield was last flat at 0.785%.
The two-year JGB yield, which tracks short-term rate expectations, briefly hit its highest since March 2011, rising to 0.230% before Ueda’s comments. It then fell back to 0.220%.
“Essentially, concerns about rising U.S. yields and prospects of additional interest rate hikes in Japan are limiting the decline of (JGB) yields,” said Makoto Suzuki, senior bond strategist at Okasan Securities.
Many market participants expect another hike by the BOJ later this year and are awaiting more clarity on timing.
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On the other hand, questions swirled on how soon and how deeply the Fed will cut interest rates this year, after recent economic data showed continued resilience.
U.S. Treasury yields, to which JGB yields tend to be sensitive, rose to multi-month highs this week in response.
Despite speculation regarding the monetary policy, JGB auctions saw seen decent sales as Japan’s fiscal year kicked off. An auction for five-year bonds saw fair sales on Tuesday, meeting market expectations.
The bid-to-cover ratio, used as a measure of demand at auctions, was 3.88 versus 3.99 in March. A higher number signals greater demand.
The five-year yield fell 0.5 bps to 0.380%.
The 20-year JGB yield ticked down 0.5 bps to 1.545% as investors eyed an auction for the bond scheduled for Thursday.
The 30-year JGB yield climbed 1.5 bps to 1.840%.
The 40-year JGB yield was up 1.5 bps at 2.145%, its highest since November.
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