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Friday, May 24, 2024

Weak Demand Pressure Reflected in JGB Yields Rise After Auction

Japanese government bond (JGB) yields inched up on Thursday amid the absence of market-moving catalysts, with the market reacting to a result of a liquidity-enhancing auction suggesting weak demand for debt.

The five-year bond yield edged up 0.5 basis point (bp) to 0.490% and the 10-year JGB yield rose 1 bp to 0.9%.

“There was no major market moving cue today so the market reacted to the outcome of the auction which was seen weak,” Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management said.

The liquidity-enhancing auction for the bonds with maturities between one year and five years received bids worth 3.6 times the amount sold, slightly lower than a ratio of 3.7 times at the previous auction in March.

JGB strategists expect the yield to make stable moves in the run up to the next Bank of Japan’s (BOJ) policy meeting, after surging last week for caution on the reduction of the BOJ’s bond purchases.

“Despite the yen’s weakness, the BOJ maintained the amounts for the regular bond buying operation intact, which will underpin the demand for JGBs,” Kaoru Shoji, Japan rates strategist at SMBC Nikko Securities said.

The BOJ on Tuesday left its plan for monthly bond buying unchanged for May, reiterating its decision at the policy meeting last week to keep the current pace of roughly 6 trillion yen ($38.53 billion) of JGB purchases per month.

The 20-year JGB yield rose 1.5 bps to 1.685%, while the 30-year JGB yield fell 0.5 bp to 1.960%.

The two-year JGB yield was flat at 0.285%.

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