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JGBs edge lower after Treasury yields firm
October 6, 2016 / 7:11 AM / a year ago

JGBs edge lower after Treasury yields firm

TOKYO, Oct 6 (Reuters) - Japanese government bonds edged down on Thursday, after upbeat economic data lifted U.S. Treasury yields in the previous session.

The benchmark 10-year JGB yield crept up 0.5 basis point (bp) to minus 0.060 percent.

December 10-year futures ended down 0.06 point at 152.00, the same level at which they opened in the morning.

U.S. Treasury yields rose overnight after the Institute of Supply Management’s reading on U.S. services sector activity rebounded to an 11-month high in September, while its employment index was also the highest since October 2015. That raised hopes for the key nonfarm payrolls report, to be released on Friday, even after separate data showed private sector hiring fell short of economists’ expectations.

The 20-year JGB yield also added 0.5 bp to 0.385 percent , while in shorter maturities, the 2-year yield rose 1 bps to minus 0.275 percent.

The Bank of Japan introduced a new policy last month of controlling the yield curve, guiding the 10-year yield around zero percent as it pushes down short- to medium-term borrowing costs while allowing super-long yields to rise.

BOJ Governor Haruhiko Kuroda told the upper house budget committee on Thursday that he does not expect the central bank will run out of government bonds to purchase for its quantitative easing programme.

Kuroda also said the BOJ is prohibited from directly underwriting government debt and that the BOJ conducts all its debt purchases in the secondary market.

The Ministry of Finance’s auction on Thursday of 400 billion yen of inflation-linked 10-year JGBs resulted in a lowest price of 104.80, largely in line with market expectations. The bid-to-cover ratio, a gauge of demand, rose to 3.21, from 2.85 at the previous sale. (Reporting by Tokyo markets team; Editing by Simon Cameron-Moore)

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