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JGB yields rise on weak auction; BOJ rate outlook eyed
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JGB yields rise on weak auction; BOJ rate outlook eyed
May 9, 2024 11:28 PM

TOKYO, May 10 (Reuters) - Japanese government bond (JGB)

yields rose on Friday amid a tepid auction for 30-year bonds, as

investors continued to search for appropriate levels following

hawkish Bank of Japan (BOJ) minutes.

The 10-year JGB yield, which moves inversely

to bond prices, ticked up 0.5 basis point (bp) to 0.910% after

the auction results were published.

The 30-year JGB yield climbed 2.5 bps to

1.995%.

Numbers showed weak demand for the super long-term bond,

with an auction tail, the gap between the lowest and average

price, of 0.30 yen. That was considerably larger than the

previous month's 0.13 yen.

The bid-to-cover ratio was somewhat lower at 3.25 versus

3.47 in April, also indicating less appetite.

The auction comes a day after the BOJ released a summary of

opinions from its April meeting, which showed some board members

saw the chance of interest rates rising faster than anticipated.

The summary also included mention of possible reductions to

the central bank's bond-buying amounts in the future.

"That hurt appetite for bonds," said Yoshiro Sato, an

economist at Resona Holdings.

"Expectations that the BOJ would maintain the current

purchase amount was a support for the market."

JGB investors have been watching closely for indications

that the BOJ could cut purchases. The bank has been an

aggressive bond buyer to defend its ultra-low rate policy, and

it owns about half of the entire market.

Many market players expect the BOJ to hike rates later this

year, with some estimating that move could come as soon as July.

Views are divided on how much more the central bank will

hike after that.

The two-year JGB yield, which is highly

sensitive to the BOJ's policy, edged up 0.5 bp to a two-week

high of 0.315%.

The five-year yield rose 0.5 bp to 0.520%.

The 20-year JGB yield was up 1.5 bps at

1.695%.

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