TOKYO: Japanese government bond (JGB) yields dropped sharply on Tuesday, as US Treasury yields fell overnight and losses in Japan and US equities boosted appetite for safe-haven debt.
The 10-year JGB yield fell 5 basis points to 1.525% in its biggest daily fall since January 16.
The five-year yield fell 6 bps to 1.105% in its sharpest decline since September 24.
“Investors turned to risk-off mode and scooped up bonds,” said Miki Den, senior Japan rate strategist at SMBC Nikko Securities.
US Treasury yields fell on Monday with those on interest-rate-sensitive 2-year notes on track for their largest daily drop since September after US President Donald Trump declined to rule out a recession as a result of his tariff policies.
In Japan, the benchmark Nikkei index fell more than 2% earlier in the session, on Wall Street’s weakness and a stronger yen.
JGB yields march higher with focus on 30-yr bond auction
The JGB yields hit more-than-a-decade highs this week amid expectations that the Bank of Japan (BOJ) would raise interest rates faster and higher on the back of rising wages and prices.
The 10-year JGB yield touched a 16-year high of 1.575% on Monday, and the five-year yield rose to as high as 1.16%.
SMBC Nikko’s Den said the declines in the yield of the 10-year JGB will be limited and the yield will not fall below 1.5%.
“With the yields hovering at this level, only limited investor groups would want to buy the JGBs”, said Den, adding that those would be foreign investors and pension funds who want to rebalance their portfolios.
The two-year JGB yield fell 4 bps to 0.83%.
The 20-year JGB yield declined 2.5 bps to 2.29% and the 30-year JGB yield fell 2 bps to 2.58%.
The 40-year JGB yield declined 1.5 bps to 2.875%.
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