JGBs slip on rallying Tokyo stocks as US Treasuries weaken through the night

Japanese government bond prices ( JGBs) slipped on Tuesday as the market was pressured by rallying Tokyo shares and an overnight retreat in US Treasuries, although firm demand at a liquidity- enhancing debt auction helped limit losses.

The benchmark 10- year yield rose half a basis point to 0.055 percent. The 20- year yield was last unchanged at 0.560 per- cent after rising to 0.570 percent earlier in the session.

Japan’s finance ministry offered 500 billion yen ($ 4.48 billion) of off- the- run JGBs on Tuesday, which was seen to have attracted short- covering demand from investors.

The ministry regularly conducts such auctions which are designed to improve market liquidity.

The Nikkei rose to a near two- year peak on a weaker yen and had an overnight rise by the S& P 500 and the Dow to record highs.

US Treasury prices slid on Monday after New York Federal Reserve President William Dudley struck a hawkish tone on monetary policy, bolstering expectations that the central bank will continue to boost interest rates.

Economic data released ear- ly on Monday also undermined bond market sentiment. Japan’s exports surged in May by the fastest in more than two years on higher shipments of cars and steel, an encouraging sign that robust global demand will help keep the country’s modest economic recovery on track.

On Friday, the Bank of Japan ( BOJ) held policy steady as widely expected, and also continued to state that it plans to increase its JGB holdings by about 80 trillion yen a year, even though the bank’s actual pace has lagged that level for the past several months.

Analysts expect the BOJ to slow its buying to around 60 trillion yen by year- end, and eventually omit the 80- trillionyen pledge from its policy statement.