JGB yield curve steepens on US Treasury declines, fiscal worries

TOKYO: The Japanese government bond yield curve steepened on Wednesday, as shorter-dated yields tracked overnight declines in US Treasury yields, while longer-dated yields rose amid revived fiscal and inflation worries.  

Here are a few details:

The benchmark 10-year JGB yield fell 3 basis points to 2.675%.

The two-year yield inched down 0.5 bp to 1.425%.

The five-year yield fell 2 bps to 1.930%. Yields move inversely to bond prices.

US Treasury yields declined on Tuesday after consumer inflation slowed more than expected in June, dampening market expectations for a near-term Federal Reserve rate hike.

“Yields on longer-dated (Japanese) bonds rose because they fell too much in the previous session, and the market revived worries about inflation and fiscal concerns,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.

The yield on 20-year JGBs fell 16.5 bps in the previous session following a stronger-than-expected auction for the bonds with the same maturity.

There was speculation that the Government Pension Investment Fund (GPIF) may have bought some of the bonds to support the auction, as bidders included a significant number of unidentified buyers, which typically include pension funds, Inadome said.

The JGB market has lifted since last week after Finance Minister Satsuki Katayama said Japan would look into the possibility of changing the asset allocation of the nation’s giant state pension funds.

On Wednesday, the 20-year JGB yield rose as much as 4 bps to 3.535%.

The 30-year yield was up 1.5 bps to 3.750%. The yield on the 40-year JGB rose 1 bp to 3.76%.‑Reuters