TOKYO: Japanese government bond (JGB) yields rose on Friday, as the market reacted to lukewarm demand at an auction for five-year bonds and digested fresh comments from the Bank of Japan (BOJ).
The 10-year JGB yield was last up 2.5 basis points (bps) at 0.720%.
The Ministry of Finance’s auction for five-year bonds saw passable-to-somewhat weak“ sales, Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, said.
The bid-to-cover ratio at the auction was 3.44, down from 3.79 last month, and the lowest since July, suggesting weaker demand.
With market participants expecting the BOJ could end negative interest rates as soon as March, a yield of about “0.3% for five-year bonds was considered a bit insufficient”, Tsuruta said.
Yields move inversely to bond prices.
The five-year yield was at 0.310% in the Asian morning, before ticking up 2 bps to 0.320% after the auction results.
JGB yields rise amid caution over auctions this week
The two-year JGB yield rose 1.5 bps to 0.110%.
JGB yields edged down Thursday, with the 10-year yield dropping as low as 0.695% at one point, after BOJ Deputy Governor Shinichi Uchida said the bank would avoid raising interest rates rapidly when scaling back monetary support.
There seemed to be some unwinding in the JGB market on Friday, Tsuruta added.
Speaking before Japan’s parliament on Friday, BOJ head Kazuo Ueda echoed his colleague’s view, saying that chances are high for easy money conditions to persist for a while, even if the central bank exits negative interest rates.
Japanese yields were also buoyed by their U.S. peers, which rose overnight ahead of key inflation data.
On the superlong end, the 20-year JGB yield climbed 3 bps to 1.500%, while the 30-year JGB yield was 2 higher at 1.785%.
The BOJ on Friday announced it will buy 3 trillion yen ($20 billion) in JGBs on Feb. 13-14.
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