TOKYO: Japanese government bond yields drifted higher on Tuesday, but trading lacked conviction as investors waited on a raft of key U.S. data this week for clues on the pace of Federal Reserve policy easing.
The five-year JGB yield ticked up 0.5 basis point (bp) to 0.52% as of 0600 GMT, despite a smooth auction of the notes by Japan’s finance ministry during the session.
So-called superlong yields also rose, although 10-year yields were steady at 0.89%.
The two-year JGB had yet to trade.
Investors are still unsure whether the Fed will opt for a super-sized 50-bp cut this month or a standard quarter-point reduction, and are looking to consumer price data on Wednesday and producer inflation numbers the following day to potentially turn the needle.
“Investors are cautious,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities.
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“They don’t want to do much trading because they don’t have much conviction about where yields are going,” he said. “It’s a choppy market.”
The Fed decides monetary policy on Thursday of next week, followed by the Bank of Japan the next day, although markets generally expect the local central bank to forgo further policy changes for now.
A surprise BOJ decision to raise rates at the end of July helped spur a sharp sell-off in global equities and a rapid appreciation in the yen.
Benchmark 10-year JGB futures edged up 0.02 yen to end Tuesday at 144.80.
The 20-year JGB yield added 1 bp to 1.7%.
The 30-year JGB yield advanced 1.5 bps to 2.065%.
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