TOKYO: Japanese government bonds fell on Monday, sending their yields higher, as they tracked moves in US peers from Friday amid a cautious mood ahead of closely watched debt auctions this week.
Ten-year JGB yields rose 2 basis points (bps) to 1.62% as of 0515 GMT, putting them 1 bp below Wednesday’s 17-year high of 1.63%.
That’s after equivalent US Treasury yields advanced some 2 bps on Friday, climbing off a 3-1/2-week low as traders adjusted positions at month-end.
US markets are closed on Monday for the Labor Day holiday.
Japan’s Ministry of Finance will auction around 2.6 trillion yen ($17.65 billion) of 10-year notes on Tuesday, the same day that Bank of Japan Deputy Governor Ryozo Himin will give a speech that will be carefully parsed for clues on the timing of the central bank’s next interest rate increase.
Traders currently lay 46% odds on a quarter-point hike by end-October.
On Thursday, the ministry will auction around 700 billion yen of 30-year bonds, a tenor that is under close scrutiny after a run of successive all-time highs last month.
Longer-dated JGB yields have risen partly on worries about increased fiscal spending after opposition parties backing tax cuts gained sway at recent upper house elections.
The prime minister has so far resisted pressure to step down.
“It is difficult to make clear predications regarding who will become … prime minister, which opposition party will cooperate, and what kind of policies will be implemented,” Noriatsu Tanji, chief bond strategist at Mizuho Securities, said in a client note.
“Continued uncertainty in fiscal and monetary policy remains strong, which could weigh on the market.”
The 30-year yield edged up 0.5 bp to 3.185%. It pushed to a record 3.235% on Wednesday.
The 20-year yield added 2 bps to 2.62%.
The five-year yield advanced 1 bp to 1.16% and the two-year yield rose 0.5 bp to 0.875%.
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