JGB yields rise ahead of 10-year bond auction

By Junko Fujita

Japanese government bond (JGB) yields rose on Thursday as investors awaited the outcome of an auction of 10-year bonds, which strategists expected to be moderately weak.

Here are a few details:

• The benchmark 10-year JGB yield (JP10YTN=JBTC) rose 2 basis points (bps) to 2.720%. Yields move inversely to bond prices.

• The 30-year yield (JP30YTN=JBTC) rose 2.5 bps to 3.980%.

• The finance ministry will sell about 2.6 trillion yen ($16.00 billion) of 10-year bonds later in the day.

• The market is concerned that the Bank of Japan will be behind the curve in coping with inflation, and the central bank would have to accelerate interest rate hikes, strategists said.

• "The outcome of the auction will be between moderately firm and relatively weak," said Takuya Onizawa, a fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

• "Excessive worries over inflation have receded as oil prices fall, but at the same time, the weak yen has pressured prices in Japan as import costs would rise."

• The yen fell to 40-year lows against the U.S. dollar, and thin trading ahead of a U.S. holiday kept traders on high alert for intervention to boost the yen.

• The five-year yield (JP5YTN=JBTC) rose 1.5 bps to 1.925%. ($1 = 162.5200 yen)