Yield on 30-year JGB falls 4 bps to session low of 3.24% after auction

Yield on 30-year JGB falls 4 bps to session low of 3.24% after auction

The yield on Japan's 30-year government bonds (JGBs) fell 4 basis points (bps) to a session low of 3.24% following a successful auction on Tuesday. The auction saw strong demand for the 10-year notes, with the yield falling by 2 bps to 1.560% [2].

The auction results were well-received by the market, with the 10-year JGB yield falling to its lowest level since July 2008. The Ministry of Finance (MOF) sold around 2.6 trillion yen ($17.65 billion) of 10-year notes, receiving bids worth 3.92 times the amount sold, the highest ratio since the sale in October 2023 [2].

The successful auction comes amidst ongoing concerns about Japan's fiscal deficit and the sustainability of its debt pile. The 30-year JGB yield, which had reached an all-time high of 3.235% last Wednesday, has been under close scrutiny due to political uncertainty and government spending plans [1].

The Bank of Japan (BOJ) Deputy Governor Ryozo Himino suggested further interest rate hikes, adding to the market's focus on the upcoming 30-year bond auction. Himino is due to speak again in the afternoon, with traders currently pricing in a 46% chance of a quarter-point increase by end-October [2].

The 30-year JGB yield may drift higher to about 3.8% if the Liberal Democratic Party (LDP) calls a leadership vote, according to Toshinobu Chiba, a Tokyo-based fund manager at Simplex Asset Management [1].

The upcoming 30-year bond auction, scheduled for Thursday, will be closely watched by investors. The previous two auctions saw relatively healthy demand, based on the ratios of total bids to the amount of bonds on sale. However, recent economic indicators, such as a run-up in Japanese stock indexes to record levels, may add headwinds for JGBs [1].

References:
[1] https://m.economictimes.com/markets/bonds/japan-30-year-auction-tests-a-jittery-bond-market-as-global-yields-surge/articleshow/123689416.cms
[2] https://economictimes.indiatimes.com/markets/bonds/benchmark-jgbs-rally-after-auction-shows-strong-demand/articleshow/123647820.cms