November 20, 2018 / 6:31 AM / a month ago

JGBs edge lower on profit-taking; 20-year auction draws tepid demand

TOKYO, Nov 20 (Reuters) - Japanese government bond prices edged lower on Tuesday as profit-taking set in after an auction of 20-year debt attracted tepid investor demand.

The 20-year notes were sold at the lowest price of 101.50, in line with market expectations, but the auction drew bids of 3.91 times the amount offered, lower than the average bid-to-cover ratio of 4.27 from the previous 12 auctions.

The 10-year JGB futures fell 0.11 point to 150.00, with a trading volume of 31,886 lots.

The benchmark 10-year cash JGB yield rose one basis point to 0.100 percent, after hitting a three-month low of 0.090 percent the previous day.

The 20-year and the 30-year yields also added a basis point each to 0.620 percent and 0.845 percent, respectively, while the 40-year yield rose half a basis point to 1.000 percent.

Speaking to a parliamentary committee on Tuesday, Bank of Japan governor Haruhiko Kuroda ruled out the chance of abandoning negative interest rates in the near-term, saying they are necessary to accelerate inflation to his 2 percent target.

Some market players speculate the BOJ may ditch negative rates in coming months to mitigate the pain that ultra-low rates are inflicting on financial institutions via narrowing margins.

Adding fuel to such a view was an academic paper released by a BOJ-affiliated think tank earlier this month that said ditching negative rates could help accelerate inflation. (Reporting by Tokyo Markets Team; Editing by Gopakumar Warrier)

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