JGB yields slip in holiday-thinned trade

Japanese government bond (JGB) yields fell across the curve on Tuesday in holiday-thinned trading, with small trades sending yields on super-long-dated bonds sharply lower.

The 20-year JGB yield fell 7.5 basis points (bps) to 3.005%, its lowest since December 30. ‌The 30-year ⁠yield slipped 8 ⁠bps to 3.405%. Yields move inversely to prices.

"I do not think today's moves in the yields were meaningful. It was just that trade was thin with investors only in Japan and Australia participating in the market," said Tomoaki Shishido, a senior rates strategist at Nomura Securities.


The markets in mainland China, Hong Kong, Singapore, Taiwan, and ⁠South Korea ‌were closed on Tuesday for the Lunar New Year holidays.

A five-year bond auction held earlier in the day ⁠saw a weak outcome, as the decline in yields in early trading made the bonds less attractive, Shishido said.

The 5-year JGB yield fell 2.5 bps to 1.645% before the auction at 0130 GMT and extended the decline after the outcome was announced, last down 4 bps to 1.63%. The five-year bond yield rose to a record high of 1.735% on ‌the day after Prime Minister Sanae Takaichi's landslide win at the nation's lower house election, as the bets for the Bank of Japan's rate ⁠hike expanded.

Yields declined as the yen strengthened against the dollar.

With forward one-year overnight index swaps (OIS) two years ahead hovering between 1.7% and 1.75%, and the BOJ having raised its policy rate to 1%, the five-year bond yield will trade around the 1.7% level going forward, said Yuki Kimura, bond strategist at Okasan Securities

The benchmark 10-year JGB yield fell 6 bps to 2.150%, its lowest since mid-January.