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JGB yields hit over 1-week high as investors brace for auction

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TOKYO — Japan’s government bond (JGB) yields rose to their highest levels in more than a week on Friday, as investors braced for an auction for 10-year bonds and as Tokyo’s consumer inflation hit a four-decade high.

The 10-year JGB yield rose to 0.475%, its highest since the Bank of Japan (BOJ) kept a trading band for the benchmark yield unchanged at the policy meeting on Jan. 18.

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The five-year yield rose to as high as 0.2%, its highest since Jan. 20, and last traded at 0.190%, up 1 basis point from the previous session.

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The BOJ said it would provide five-year loans against collateral to financial institutions, a move to encourage investors to buy 5-year notes to contain elevated yields.

“The 10-year yield will rise to 0.5% in the run up to the auction. Investors want to buy bonds with a higher yield,” said Kazuhiko Sano, a strategist at Tokai Tokyo Securities.

The Ministry of Finance is planning to issue about 2.7 trillion yen ($20.8 billion) of 10-year bonds on Thursday, providing much needed liquidity to the market.

The benchmark 369th 10-year bonds, which were first issued last month, carried a coupon rate of 0.5%.

The two-year JGB yield rose 1 basis point to -0.005%, its highest since Jan. 19.

Core consumer prices in Japan’s capital, a leading indicator of nationwide trends, rose 4.3% in January from a year earlier, marking the fastest annual gain in nearly 42 years and keeping the central bank under pressure to phase out economic stimulus.

Benchmark 10-year JGB futures fell 59 yen to 146.81, hitting its lowest since Jan. 20, with a trading volume of 15,253 lots.

The 20-year JGB yield jumped 7 basis points to 1.370%, its highest since Jan. 19.

The 30-year JGB yield rose points 5.5 basis points to 1.565%.

The 40-year JGB yield rose 3.5 basis points to 1.810%.

($1 = 129.9200 yen) (Reporting by Junko Fujita; editing by Uttaresh.V)

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