TOKYO: Japanese government bond (JGB) yields fell on Thursday after an auction for 30-year bonds generated the strongest demand in years, while hawkish comments central bank board member Naoki Tamura bolstered expectations of a hike in interest rates.
The 30-year JGB yield slid 6.5 basis points (bps) to 2.26% after the bid-to-cover ratio, a common measure of demand at auctions, came in at its highest since November 2020 at 3.74.
Corresponding yields had risen to the 2.3% level earlier this week, making them attractive buy for investors, particularly as the end of the fiscal year nears, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.
The 10-year JGB yield was down 2 bps at1.26%, while 10-year JGB futures rose 0.14 points to 140.51 yen.
Investors have been solidifying bets that the BOJ will continue to hike rates this year as Japan’s inflation-adjusted real wages rose 0.6% year-on-year in December and recent Bank of Japan (BOJ) communications leaned hawkish.
But many market participants also expect a gradual pace of rate hikes every six months.
JGB yields hit fresh multi-year highs as rising wages drive BOJ’s rate hike bets
Board member Naoki Tamura, known to be one of the BOJ’s most hawkish members, said on Thursday that the central bank must raise interest rates to at least 1% by the second-half of the fiscal year beginning in April.
“I think his statement was within the range of expectations. The reaction in the foreign exchange market was big, but I think the bond market was of the view that it’s Tamura, so of course he would say something to this effect,” said Inadome.
The two-year JGB yield, which corresponds more closely with monetary policy expectations, rose to its highest since October 2008 at0.765% in morning trade. It was last up 0.5 bp at 0.76%.
The five-year yield edged down 0.5 bp to 0.935%.
The 20-year JGB yield fell 4.5 bps to 1.945%.
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