January 29, 2020 / 5:26 AM / in 25 days

JGBs soften as risk-averse mood eases ahead of Fed

TOKYO, Jan 29 (Reuters) - Japanese government bond prices dropped on Wednesday as investor risk aversion triggered by the coronavirus outbreak eased for the moment ahead of a U.S. Federal Reserve policy announcement.

Benchmark 10-year JGB futures fell 0.06 point to 152.48. The yield on the benchmark 10-year cash JGBs rose 0.5 basis point to minus 0.035%.

The moves reflect a rebound in Japanese share prices from three-week lows as investors tried to gauge the extent of the damages from the epidemic.

The two-year JGB yield rose 0.5 basis point to minus 0.130% while the five-year yield rose 0.5 basis point to minus 0.130%.

But long-dated bonds were supported, with the 20-year JGB yield and 30-year bonds yield flat at 0.240% and 0.375%.

The market is now looking to a policy announcement from the U.S. Federal Reserve. While the Fed is expected to maintain its policy, investors are looking for clues on its stance on balance sheet expansion and interest on excess reserves among other things.

The BOJ maintained the size of its bond purchase in its operation on Wednesday, buying 420 billion yen ($3.83 billion)of 1-3 year JGBs, 340 billion yen ($3.10 billion) of 3-5 year bonds and 350 billion yen ($3.19 billion) of 5-10 year notes.

$1 = 109.7000 yen Reporting by Tokyo Markets Team; Editing by Shounak Dasgupta

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