TOKYO: Japan’s five-year government bond yield traded flat on Wednesday, retreating from the session high after a bond auction saw firm demand.
Here are a few details:
The five-year JGB yield turned flat at 2.34%, after rising to 2.35% earlier in the session. The yield was last up 0.5 bp at 2.345%.
The Ministry of Finance’s five-year bond auction received bids worth 3.56 times the amount sold, above the past-year average of 3.36 times.
The auction saw strong demand, supported by declines in yields on French bonds, said Takashi Fujiwara, lead fund manager at Resona Asset Management.
On Tuesday, France’s 10-year yield fell to 4.8034% after finishing Monday at 4.8958%.
French government bonds have sold off sharply as the government tries to enact an unpopular budget to lower its deficit, a difficult prospect ahead of next year’s election.
Markets have begun pricing in the end of the Bank of Japan’s interest rate hike cycle, which has also boosted appetite for the five-year bonds, said Fujiwara.
“Market players now see the BOJ’s terminal rate at between 1.75% and 2%, and that will be reached in June next year,” he said.
“As seen in the latest BOJ’s quarterly survey, or Tankan, the market sees limited upside risks for inflation expectations.
That has helped cement the outlook for the BOJ’s interest rate hikes,“ said Fujiwara.
The 10-year JGB yield slipped 0.5 basis point (bp) to 2.995% following the auction. ‑Reuters