TOKYO — Japan’s 40-year government bond yield fell sharply on Tuesday after an auction drew strong demand, while yields on some shorter notes tracked U.S. Treasury peers higher.
The 40-year JGB yield fell 7 basis points (bps) to 1.550%.
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The 40-year bond auction received bids worth 2.69 times the amount sold, higher than a ratio of 2.55 times at the previous auction.
The 30-year JGB yield rose 2 bps to 1.360%. The five-year yield rose 2 bps to 0.085%.
U.S. Treasury yields rose on Monday on greater optimism that stress in the banking sector will be contained and as the Treasury Department saw soft demand for a sale of two-year notes.
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“Japanese yields will tend to track U.S. yields as the Bank of Japan’s policy will depend on the movement of the U.S. Treasury yields,” said Ataru Okumura, strategist at SMBC Nikko Securities.
Current BOJ Governor Haruhiko Kuroda ends his second five-year term on April 8, with incoming governor Kazuo Ueda facing the challenge of changing the bank’s ultra-low rate policy.
The 10-year JGBs have not traded as of 0521 GMT, and the yield remained at 0.290%, as liquidity of the notes remain thin.
“There won’t be an active trade of the 10-year bonds until new bonds will be issued. The BOJ’s ownership of the 10-year notes remain high,” said Okumura.
The two-year JGBs did not trade and the yield stayed at -0.070%.
Benchmark 10-year JGB futures fell 0.23 yen to 148.41, with a trading volume of 8,134 lots. (Reporting by Junko Fujita; Additional reporting by Tokyo markets team; Editing by Nivedita Bhattacharjee)
