November 28, 2019 / 6:41 AM / 17 days ago

JGBs slip, 2-year bonds auction draws tepid demand

TOKYO, Nov 28 (Reuters) - Japanese government bond prices slipped on Thursday, with an auction of two-year notes seeing tepid demand as rising hopes for a Sino-U.S. trade deal put the market on track for its third consecutive monthly fall.

Rising optimism that the Washington and Beijing will seal an interim agreement to defuse their protracted tariff war has undermined the safe-haven appeal of Japanese bonds since September.

On Thursday, investors seemed to have shrugged off concerns that mounting tensions over Hong Kong would prove to be an impediment to the trade deal, with the benchmark 10-year JGB futures falling 0.27 point to 153.29.

The contract is down 0.63 point in November, after two straight months of decline.

The 10-year JGB yield rose 2 basis points to minus 0.095%, up 5.5 basis points on the month.

At the longer end of the market, the 20-year yield edged up 2 basis points to 0.250%, while the 30-year JGB yield rose 1.5 basis points to 0.400%.

The two-year JGB yield rose 1 basis point to minus 0.190%.

The auction of 2.0 trillion yen two-year JGBs drew weak demand. The auction’s tail, or the gap between the lowest and average prices, was 0.011 compared with zero in the previous auction, while the bid-to-cover ratio dropped to 4.13 from 4.81.

The five-year yield rose 2.5 basis points to minus 0.190%.

The market showed no reaction to data showing a sharp fall in Japan’s retail sales.

Reporting by Tokyo Markets Team; Editing by Aditya Soni

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