JGB yields edge up as auction results signal weak demand

JGB yields inch up: JGB yields saw a slight increase on Thursday without any notable catalysts driving the market, as attention turned to the results of a liquidity-enhancing auction, indicating subdued demand for debt.

The yield on the five-year bond edged up by 0.5 basis points to 0.490 per cent, while the 10-year JGB yield rose by 1 basis point to 0.9 per cent.

Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, noted, “There was no major market-moving cue today, so the market reacted to the outcome of the auction which was seen as weak.”

Auction liquidity ratio

The auction, aimed at enhancing liquidity for bonds maturing between one and five years, received bids worth 3.6 times the amount sold, slightly lower than the ratio of 3.7 times seen at the previous auction in March.

JGB analysts anticipate that yields will remain relatively stable leading up to the next Bank of Japan (BOJ) policy meeting, following a surge last week prompted by concerns over a reduction in the BOJ's bond purchases.

"Despite the weakening yen, the BOJ has maintained the amounts for its regular bond buying operations unchanged, which should support demand for JGBs," explained Kaoru Shoji, a Japan rates strategist at SMBC Nikko Securities.

BOJ maintains bond

In its latest decision on Tuesday, the BOJ opted to keep its monthly bond buying plan unchanged for May, reaffirming its focus on maintaining the current pace of around 6 trillion yen ($38.53 billion) of JGB purchases per month.

Yields on 20-year JGBs rose by 1.5 basis points to 1.685 per cent, while 30-year JGB yields fell by 0.5 basis points to 1.960 per cent. The two-year JGB yield remained unchanged at 0.285 per cent.

(With Reuters Inputs)