Most JGBs track rally in Treasuries; superlong sector heavy before auction

April 05, 2023 03:25 PM AEST | By Reuters
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By Kevin Buckland

TOKYO, April 5 (Reuters) - Japanese government bond futures ticked higher on Wednesday, taking cues from a U.S. bond rally overnight, but cash JGBs were mixed with superlong bonds underperforming other tenors ahead of an auction of 30-year securities.

Ten- and 20-year yields ticked lower, however, with the Bank of Japan unexpectedly increasing the offer amount for its outright purchases of bonds of those maturities.

The benchmark 10-year JGB futures were up 0.09 yen at 147.57, as of 0445 GMT, and earlier rose as much as 0.31 yen.

The 10-year cash JGB yield fell 0.5 basis point (bp) to 0.465%, after starting the day down at 0.455%.

The 20-year yield declined 0.5 bp to 1.095%.

Overnight, the 10-year Treasury yield dropped as low as 3.335% and remained around that level in Tokyo trading.

The BOJ offered to purchase 250 billion yen ($1.9 billion) of bonds with 10-25 years left to maturity, up from 200 billion yen in its previous operation. The central bank kept the amounts unchanged for purchases of JGBs with one to three, and three to five years to maturity.

"The result was a bit of a surprise," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

"I think more market participants were expecting the amount would be unchanged or even smaller than the last operation," she said.

"The BOJ may be concerned about the sharp increase in the 20-year sector since the start of the month."

Since March 30, the 20-year yield had risen 12 bps, as of Tuesday's close.

Meanwhile, the 30-year JGB yield was flat at 1.345% on Wednesday, and the 40-year yield rose 1 bp to 1.565%.

A weak 10-year auction on Tuesday has spurred some caution before Thursday's 30-year JGB sale.

The two-year JGB yield fell 0.5 bp to -0.035%, while the five-year yield rose 0.5 bp to 0.150%. ($1 = 131.6900 yen) (Reporting by Kevin Buckland; Editing by Sonia Cheema)


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