April 11, 2017 / 6:45 AM / 9 months ago

JGBs gain on global political jitters, 10-yr yield hits 3-mth low

TOKYO, April 11 (Reuters) - Japanese government bond prices ticked up on Tuesday as rising geopolitical tensions over North Korea and Syria as well as renewed uncertainty over the French presidential election prompted fund inflows to the safety of bonds.

The 10-year JGB yield dropped to 0.040 percent , its lowest level since mid-January, and down 0.5 basis point from the previous close.

The 20-year yield fell one basis point to 0.610 percent , a low last seen in late January while the five-year yield dropped a half basis point to minus 0.160 percent, matching its low so far this year.

Global bond yields have fallen on rising geopolitical concerns as a U.S. Navy strike group headed toward the western Pacific Ocean near the Korean peninsula as a show of force. The move came after the U.S. missile attacks on a Syrian air base.

China and South Korea agreed on Monday to tougher sanctions on North Korea if it carries out nuclear or long-range missile tests.

In France, gains for far-left candidate Jean-Luc Melenchon in polls further complicated the outlook for the upcoming presidential election, leading to a widening of yield spreads between French bonds and German bonds.

The benchmark 10-year JGB futures rose 0.12 point to 150.56 .

An auction of 400 billion yen 10-year inflation-linked JGBs on Tuesday attracted a fair demand, with bid-to-cover ratio rising to 3.64 from previous 2.61, traders said.

The bonds were sold at highest yield of minus 0.385 percent, 42.5 basis points below the conventional bonds of the same maturity.

The gap, called the breakeven yield, is considered as a measure of investors’ inflation expectations. It has fallen to the lowest level since early November. (Reporting by Tokyo Markets Team; Editing by Shri Navaratnam)

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