TOKYO: Japanese government bond prices tumbled on Thursday following the plunge in US Treasuries, with the benchmark JGB futures posting their biggest fall since the Bank of Japan started soft-peg of long-term bond yields in September.
US bond prices dropped on Wednesday as expectations that US President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, will stoke inflation.
The 10-year JGB yield hit a 1-1/2-month high of minus 0.035 percent from minus 0.080 percent, while the price of the benchmark 10-year JGB futures fell 0.40 point to 151.55.
It was the biggest daily fall since Sept. 21, the day the BOJ announced its current policy to guide the 10-year yield around zero percent.
Yet, given the BOJ's tight grip on the market, moves in JGBs were dwarfed by huge swings in the US bond market.
The 10-year US Treasuries yield shot up to a 10-month high of 2.092 percent from a low of 1.716 percent hit earlier on Wednesday.
Safe assets such as government bonds initially rose on Wednesday as investors regarded the uncertainty from Trump's policy stance as fuelling flight-to-quality bids in bonds.
The JGB yield curve slightly steepened, in line with the Treasuries market and also following mediocre results of 30-year JGB auction on Thursday.
The tail, or the gap between the lowest and average price, was 0.19, larger than 0.13 in the previous auction. The bid-to-cover ratio also dropped to 3.50 from 3.64.
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