Japanese bonds rise as Trump pauses Iran strike plans; 40-year auction uneventful

TOKYO: Japanese government bonds rose on Tuesday as investors saw signs of an off-ramp in the Middle East conflict after US President Donald Trump held off on striking Iran’s energy infrastructure.

The benchmark 10-year JGB yield fell 3 basis points to 2.275%, retreating from Monday’s two-month high of 2.305%.

Yields move inversely to bond prices.

JGBs held onto gains even after demand at a sale of super-long-term notes declined.

The finance ministry sold about 400 billion yen ($2.5 billion) of 40-year JGBs, with the bid-to-cover ratio, a measure of demand, falling to 2.54 from 2.76 at the previous sale in January.

“The awarded yield itself came in somewhat higher than the median forecast, so in that sense it was very slightly weaker

 than expected,“ said Naoya Hasegawa, chief bond strategist at Okasan Securities.

“That said, it was still within the expected range … I think the overall assessment would probably be that the result was fairly uneventful,” he said.

The yield on the 40-year JGB, Japan’s longest tenor, fell 1 bp to 3.765% following the auction.

Trump postponed a threat to bomb Iran’s power grid because of what he described as productive talks with unidentified Iranian officials.

Iran, however, denied that it had engaged in negotiations with the US Japan’s core consumer inflation hit 1.6% in February to slide below the Bank of Japan’s 2% target for the first time in nearly four years, data showed on Tuesday, complicating its efforts to justify further interest rate hikes.

The two-year yield, the one most sensitive to BOJ policy rates, was flat at 1.3%.

The five-year yield fell 1 bp to 1.71%.

The 20-year JGB yield slid 3 bps to 3.135%.

The 30-year yield sank 1 bp to 3.550%.