Japan’s 20-year bond yield falls after strong auction

TOKYO: Yields on 20-year Japanese government bonds fell on Wednesday after a strong auction in the previous session, while those on short-term bonds inched higher on bets of an early rate hike.

The 20-year JGB yield fell 2 basis points (bps) to 3.250%.

Yields move inversely to bond prices.

“There is no new sale of super-long bonds until May, which is a support for the sector until then,” said Naoya Hasegawa, chief bond strategist at Okasan Securities.

The 20-year bond auction saw firm demand in part because of a lower monthly issuance, Hasegawa said.

The finance ministry sold about 700 billion yen ($4.40 billion) of 20-year bonds, 100 billion yen less than previous sales.

The next new bond auction for the super-long sector will be on May 14, where the ministry will sell 30-year bonds.

The 30-year yield fell 3 bps to 3.590%.

“Even as the market has priced in only around a 30% chance of a rate hike in April, the environment may change depending on the outcome of the upcoming talks between the US and Iran,” said Hasegawa. US President Donald Trump said talks with Iran could resume in Pakistan over the next two days, after breaking down over the weekend, sending oil prices lower.

Swap rates indicate a 27.61% chance of a 25-basis point Bank of Japan rate hike in April and a 76% probability of the same amount in June.

The two-year yield rose 1 bp to 1.38%.

The five-year yield rose 1 bp to 1.845%.

The 10-year JGB yield fell 0.5 bp to 2.410%.