TOKYO Dec 15 Japanese government bond prices
fell on Thursday, with the benchmark 10-year JGB yield matching
this week's 10-month high in the wake of a rise in U.S. Treasury
yields after the Federal Reserve projected a greater number of
interest rate hikes next year.
The benchmark 10-year yield added 2.5 basis
points (bps) to 0.080 percent, while 10-year JGB futures
finished down 0.25 point at 149.72.
The Federal Reserve's 25 basis-point interest rate increase
on Wednesday was widely anticipated by financial markets. After
the Fed signalled three hikes instead of two in 2017, the yield
on 10-year Treasuries rose as high as 2.587 percent,
its highest level since September 2014.
"A sharp rise in U.S. Treasuries yields put renewed upward
pressure on the JGB curve," said Naomi Muguruma, senior
strategist, Mitsubishi UFJ Morgan Stanley Securities.
"I think market participants are sceptical about the BOJ's
commitment to yield curve control," Muguruma said. "Domestic
investors are staying on the sidelines to see if U.S. Treasury
yields continue to rise."
Demand at an auction of 20-year JGBs was relatively strong,
she said, as many investors expect the Bank of Japan to offer to
buy superlong bonds in its asset purchase operations on Friday
to keep rising yields in check, as it did on Wednesday.
Under its current monetary policy framework of "yield curve
control," the BOJ aims to guide the 10-year JGB yield to around
A BOJ official on Wednesday said that its increased purchase
of superlong bonds was aimed at steering the JGB yield curve
toward what the central bank deems appropriate, and that the
move took into account recent rapid yield rises and the
possibility of further volatility.
On Thursday, the Ministry of Finance offered 1.1 trillion
yen ($9.37 billion) of 20-year JGBs with a 0.6 percent coupon,
and 59.4576 percent of the bids were accepted at the lowest
price of 99.00.
The sale drew bids 3.35 times the amount offered, up from
the previous sale's bid-to-cover ratio of 3.17 times. The tail
between the average and lowest accepted prices narrowed to 0.19,
compared with that of last month's offering at 0.40, indicating
stronger demand for the bonds.
The 20-year JGB yield edged up 0.5 bp to
But the 30-year yield shed 1.5 bps to 0.715
percent, moving away from 0.760 percent earlier as some
investors stepped in to buy at session lows.
($1 = 117.4200 yen)
(Reporting by Tokyo markets team; Editing by Amrutha Gayathri)