TOKYO: Japanese government bond (JGB) yields inched down further on Thursday, mirroring US Treasury yields, on the same day that an auction for 30-year Japanese securities surprised with a decent show of demand.
The 30-year JGB yield saw the largest decline, ticking down 4 basis points (bps) to its lowest since Oct. 16 at 1.725% in the wake of the auction. The 10-year JGB yield fell to a three-week low of 0.83%.
The results of the sale were “stronger than expected,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities, adding that it’s possible the results were partly due to overseas investors looking to close their short positions before heading into the end of the year.
“Clearly, many market participants underestimated short-covering needs.”
Benchmark JGB 10-year yield ticks up, mirroring US peers
The tail - the difference between the lowest and average bid, and a measure of demand - was 0.20 yen, compared with 0.50 yen at last month’s auction, which saw the weakest demand in more than four years.
The smaller the tail, the higher the demand, and vice versa. Elsewhere on the super-long end, the 20-year JGB yield slipped 3 bps to 1.55%.
The five-year yield edged down to 0.405%.
Japanese government yields have fallen nearly every day this week, tracking a dip in their US peers as market participants ramp up bets that the Federal Reserve is nearing the end of its rate hike cycle.
The benchmark US 10-year Treasury yield was last hovering around 4.49%.
Meanwhile, a summary of opinions from the Bank of Japan’s Oct. 30 - 31 monetary policy meeting released on Thursday showed some policymakers last month called for the need to start phasing out massive stimulus.
The summary highlighted a recent “shift in (the BOJ’s) communications,” with a heavier focus on positive economic news than seen in the past and higher expectations for next year’s spring wage negotiations, said Stefan Angrick, associate director and senior economist at Moody’s Analytics in Japan.
“That arguably lays the groundwork for steps toward tightening.”
The BOJ kept its ultra-low interest rate targets unchanged at their monetary policy meeting last week but tweaked the yield curve control (YCC) to loosen its grip on long-term interest rates.
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