TOKYO, July 9 (Reuters) - The benchmark 10-year Japanese
government bond yield hit a 30-year high on Thursday, driven by
concerns over inflation from renewed tensions in the Middle East
and Japan's fiscal health, while a five-year JGB auction was
relatively firm as expected.
The 10-year JGB yield rose 3.5 basis points to
2.900%, the highest since September 1996. It also marked its
ninth straight day of gains, the longest streak in 19 years.
Yields move inversely to bond prices.
Analysts saw the outcome of five-year note auction as
moderately firm. The auction's bid-to-cover ratio, a measure of
demand, was 3.43 times, compared with 3.11 times at the previous
sale.
"When yields are up across the curve, investors want to buy
shorter-dated bonds to avoid risks," said Miki Den, the senior
Japan rate strategist at SMBC Nikko Securities.
"But the level of the yield on the five-year bonds is not
high enough given ongoing inflation. That capped demand for the
auction," he added.
The five-year yield rose 0.5 bps to 1.990%,
easing slightly after the auction. The two-year yield
, the one most sensitive to the Bank of Japan's
policy rates, increased 1.5 bps to 1.445%.
Oil prices jumped more than 1% after U.S. President Donald
Trump said he thought a tentative deal to end the war with Iran
was over, pushing U.S. Treasury yields to a multi-week high.
Longer-dated JGBs, more sensitive to inflation and
fiscal-risk premiums, came under pressure. The 20-year JGB yield
climbed 2 bps to 3.890%. The 30-year yield
added 3 bps to 4.030%. The yield on the 40-year
JGB, Japan's longest tenor, rose 5 bps to 4.055%.
JGB yields have risen since the government outlined large
spending plans in the policy blueprint last month. The blueprint
called on the BOJ to align monetary policy with growth efforts,
fuelling concerns the government could pressure the central
bank to keep interest rates low and risk falling behind the
curve as inflationary pressures build.
Tokyo is considering revising language on monetary policy in
the economic blueprint, a draft obtained by Reuters showed.
The gap between 10-year and 2-year JGB yields widened on
Wednesday to 143 bps, the highest since 2004, reflecting growing
concerns about inflation and price risk on the long end along
with shrinking expectations for BOJ rate hikes on the short end.
($1 = 162.5500 yen)