Japanese govt bonds slip on ongoing fall in US Treasuries

Japanese government bonds ( JGBs) sagged on Thursday, with the 20- and 30- year bond yields hitting eight- month highs, following a retreat in US Treasuries and on caution ahead of a 40- year JGB auction.

Long- dated JGBs came under pressure as a sell- off in US Treasuries showed no sign of abating, with the 10- year US yield hitting a 16- month high.

US bonds have been sold on the expectation that US president- elect Donald Trump’s policies may boost fiscal spending and lift US growth and inflation.

The 30- year JGB yield rose to 0.650 percent, its highest level since mid- March. The 20year yield edged up to 0.500 percent, which was also an eight- month high.

Investors are turning cautious ahead of an auction on Friday of 500 billion yen 40year JGBs.

The 40- year JGB yield has risen 18 basis points since the BOJ adopted its yield curve control policy in September by switching to targeting interest rates under a revamped monetary policy program.

But so far the BOJ has not taken any steps to curtail rise in those maturities.

In contrast, the rise in shorter- dated bond yields was limited following the BOJ’s operation last week to keep a tab on them.

The BOJ last Thursday offered to buy an unlimited amount of two- year JGBs at minus 0.09 percent and five- year JGBs at minus 0.04 percent, rolling out the new bond- buying tool it unveiled in September to hold back rises in bond yields.

Market players took the levels where the BOJ said it would buy as soft policy targets in addition to its official policy target of - 0.10 percent in the shortterm interest rates and zero percent in the 10- year yield.