Japan bond yields mixed after relatively weak 5-year auction

TOKYO: Japanese government bond yields were mixed in choppy trade on Tuesday as investors adjusted positions, while an auction for the 5-year maturities was seen as relatively weak.

Here are a few details: The 5-year yield rose 0.5 basis point to 1.910%. Yields move inversely to bond prices.

The auction’s bid-to-cover ratio, a measure of demand, was 3.11 times, the lowest since February; in May it was 3.22.

“Yields have fallen to around 1.9%, and last month … city banks were buying medium-term bonds, so demand from banks probably will not emerge unless yields reach 2%,” said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.

The 2-year yield, most sensitive to Bank of Japan policy rates, increased 0.5 bp to 1.41%.

The benchmark 10-year JGB yield was flat at 2.670%.

The 20-year JGB yield lost 0.5 bp to 3.565%, but the 30-year yield sank 1 bp to 3.840%.

The yield on the 40-year JGB, Japan’s longest tenor, fell 0.5 bp to 3.765%.

Finance Minister Satsuki Katayama said she held an online meeting with US Treasury Secretary Scott Bessent late on Monday to discuss global financial markets, as concerns mount over sharp currency swings.

Pressed on whether currency intervention was explicitly addressed, Katayama stopped short of confirming any such talks.

However, she underscored that Japan and the US share firm mutual understanding that decisive action will be taken if necessary.

“Given Bessent’s track record of helping create the conditions for BOJ rate hikes, the meeting could prompt bond market speculation that the BOJ may accelerate the pace of rate increases to stem yen weakness,” Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said in a note.‑Reuters