Global Market: Japan bond yields steady ahead of BOJ policy decision

Japanese government bonds were largely steady on Thursday, supported by strong demand at an auction of two-year notes and gains in US Treasuries after the Federal Reserve kept interest rates unchanged, Reuters reported.

Investors remained cautious ahead of the Bank of Japan's monetary policy decision on Friday, with markets widely expecting the central bank to maintain its current interest rates.

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According to Reuters, the US Treasury market strengthened after the Federal Reserve's latest decision offered few indications that it would raise interest rates at its next meeting in December. The move provided support to Japanese government bonds by easing concerns about a more aggressive tightening of monetary policy.

The benchmark two-year Japanese government bond yield fell 0.5 basis point to 1.895%, reversing an earlier modest increase following the auction results. Bond yields move inversely to prices.

Demand at the two-year bond auction strengthened, with the bid-to-cover ratio rising to 4.03 from 3.89 at the previous month's sale, indicating improved investor appetite for Japanese government debt.

Other maturities were mixed. The 10-year JGB yield edged up 0.5 basis point to 2.83%, while the five-year yield remained unchanged at 2.265%. The 30-year yield rose 0.5 basis point to 3.88%. The 20-year bond had not traded as of 0514 GMT.

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The BOJ is widely expected to leave its policy rate unchanged at Friday's meeting, as policymakers assess economic conditions and the outlook for inflation before deciding on further monetary tightening.

A Reuters poll of economists indicated that the central bank is likely to raise interest rates by 25 basis points in December, suggesting that investors expect a gradual approach to policy normalisation rather than an immediate increase.

The combination of firm auction demand and gains in US Treasuries helped stabilise the Japanese bond market ahead of the BOJ's decision, with investors closely monitoring signals on the timing and pace of future rate increases.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)