JGB Yields Drop after Solid Auction Sales, BOJ Comments (Update 1)

REUTERS/Kim Kyung-Hoon
Japan’s long-term government bonds level and Japanese Yen rate against the U.S. dollar are seen through rain drops on an electric board outside a brokerage in Tokyo, Japan January 16, 2023.

TOKYO, March 27 (Reuters) – Japanese government bond (JGB) yields fell on Wednesday, with the benchmark 10-year yield hitting a three-week low, as investors digested comments from Bank of Japan (BOJ) officials amid favorable bond auction results.

While the market had braced for comments from hawkish BOJ board member Naoki Tamura, the central bank official made few waves, saying the central bank must proceed slowly but steadily toward normalizing its monetary policy.

At a news conference later, Tamura added that it was hard to say exactly how much Japan’s interest rates could rise.

Meanwhile, BOJ Governor Kazuo Ueda said it was important to support the economy with accommodative monetary policy for the time being.

The 10-year JGB yield fell 1.5 basis points (bps) to 0.730% in the Asian afternoon, its lowest since March 7. Bond yields move inversely to prices.

With the BOJ’s exit from negative interest rates out of the way, investors are seeking more clues on the bank’s future rate path.

Some clarity could come when the BOJ releases its the quarterly economic projections at its April policy meeting, said Ryutaro Kimura, a fixed income strategist at AXA Investment Managers.

The results of the BOJ’s second policy review workshop in May and additional wage negotiation news will also garner attention.

Yields on superlong bonds saw the largest declines, following solid sales at an auction for 40-year notes.

The bid-to-cover ratio – a measure of demand at auctions – was 2.49, the highest since September. A larger number signals higher demand.

The 40-year JGB yield was last 3 bps lower at 2.050%.

The 20-year JGB yield and 30-year JGB yield declined 2.5 bps to 1.480% and 1.785%, respectively. The 20-year yield sat at a three-week low.

On the short end, the two-year JGB yield edged down 0.5 bp to 0.190%.

The five-year yield fell 1.5 bps to 0.360%.