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Long-dated JGB yields edge up on global tightening fears
July 4, 2017 / 6:19 AM / 3 months ago

Long-dated JGB yields edge up on global tightening fears

TOKYO, July 4 (Reuters) - Long-dated Japanese government bonds eased slightly on Tuesday as worries that the world’s central banks may be winding up their loose monetary policies kept investors on edge.

The auction of 2.2 trillion yen of 10-year JGBs held on Tuesday attracted strong demand as investors see limited downside in their prices, and upside in yields, given the Bank of Japan’s commitment to keep the 10-year yield around zero percent.

The benchmark 10-year yield stood flat at 0.080 percent, off a 3 1/2-month high of 0.085 percent hit last week.

The auction attracted bids 4.77 times the offer, the highest bid-to-cover ratio in more than a decade. The lowest accepted price was slightly stronger than market expectations.

But yields on longer-dated bonds rose as investors were more worried about Thursday’s auction of 30-year JGBs, on which the BOJ does not have an explicit yield target and has less control.

The 20-year yield rose 0.5 basis point to 0.600 percent while the 30-year yield rose 1.5 basis point to 0.865 percent, a three-month high.

“Because of the BOJ’s yield curve control, 10-year bonds were easier to buy. On the other hand, investors remain wary of 30-year bonds as volatility in global bond markets has risen and U.S. bond yields have not stopped rising,” said Naoya Oshikubo, yen rates strategist at Barclays.

Global bond yields have risen sharply after European Central Bank President Mario Draghi said last Tuesday that the ECB could adjust its policies.

Policymakers from the Bank of England and the Bank of Canada also signalled they could raise interest rates, fuelling worries about tighter monetary conditions globally.

The 10-year JGB futures fell 0.01 to 150.15.

The market was little affected by rising geopolitical tensions in Asia after North Korea test-fired an intermediate-range ballistic missile and a U.S. warship sailed near a disputed island in the South China Sea. (Reporting by Tokyo Markets Team; Editing by Sunil Nair)

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