TOKYO: Japanese government bond yields dropped on Thursday amid pressure from a steep slide in US Treasury yields overnight and strong demand at an auction of domestic 20-year bonds.
The 10-year JGB yield sank 4.5 basis points (bps) to 1.205% as of 0555 GMT, retreating from Wednesday’s peak of 1.255%, a level previously not seen since April 2011.
The 20-year JGB yield tumbled 5.5 bps to 1.96%, with measures of demand at a sale of 758.2 billion yen of the securities improving from the previous auction last month. The 30-year JGB yield fell 3 bps to 2.325%.
Benchmark 10-year JGB futures rose 0.45 yen to 141.04. Bond yields move inversely to prices.
The 10-year US Treasury yield stood at 4.6593% on Thursday, after plunging as much as 15 bps to a one-week low of 4.6370% in the prior session.
US data overnight showed a cooling in core inflation, which reignited bets for a Federal Reserve interest rate cut by July.
At the same time, declines in shorter-dated JGB yields were shallower amid rising bets for the Bank of Japan to raise rates at its meeting next week.
JGB 10-year yields hit 14-year highs as BOJ outlook weighed
Comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week have opened the door to a rate hike on Jan. 24, barring any resurgence in market volatility after Donald Trump’s inauguration as US President.
“Although there is still elevated uncertainty around the Trump administration’s management of policy and the market’s reaction thereto, it appears that at least the BOJ’s stance on rate hikes has completely changed since December,” Barclays analysts wrote in a report, as they brought forward their call for the next BOJ hike to this month from March.
The two-year JGB yield eased 1 bp to 0.69%, while the five-year yield fell 2.5 bps to 0.865%.
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