TOKYO: Japanese government bond (JGB) yields declined to two-week lows on Wednesday tracking US yields, even as investors remained cautious regarding potential tapering of the Bank of Japan’s (BOJ) bond purchases at its policy meeting next week.
The benchmark 10-year yield briefly fell to 0.99%, below the psychologically significant 1% mark for the first time since May 24.
It was last down 3 basis points (bps) at 1%, while 10-year futures rose 0.32 yen to 143.83 yen. The two-year yield declined 3 bps to 0.35%.
Japan’s 2 year bond yield hits 13-year high as BOJ chief hints chance of another rate hike
US Treasury yields slid to an almost three-week low overnight after data showed that domestic job openings fell more than expected in April.
The slide has generated downward pressure in the JGB market, while solid demand at an auction for Japan’s 10-year bonds on Tuesday helped pull yields lower.
But while yields have approached levels seen as increasingly attractive to major domestic institutional investors, concerns about potential policy changes remain, said Ryutaro Kimura, fixed income strategist at AXA Investment Managers.
“The recent high volatility in JGB yields is attributed to a decline in market liquidity, as bond investors have become more cautious in their JGB purchases…ahead of the June BOJ meeting.”
A surprise reduction to the BOJ’s bond-buying on May 13, along with a slew of hawkish comments from policymakers, have caused bets for another rate hike as soon as July to rise, and put investors on alert for an official cut to the central bank’s bond purchases.
Japan’s benchmark yields have touched more than decade peaks this year, with the 10-year yield reaching a 13-year peak of 1.1% on Thursday.
Elsewhere on the curve, the 20-year JGB yield ticked down 3.5 bps to 1.830%, while the 30-year JGB yield declined 4.5 bps to 2.175%.
The five-year yield fell 3.5 bps to 0.565%.
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