Japan bond yields decline as investors await 5-year debt auction

Japan's five-year government bond yield declined on Thursday as investors awaited the outcome of an auction of bonds with the same maturity, with expectations of further Bank of Japan (BOJ) interest rate hikes largely priced into the market, as per a report by Reuters.

The five-year Japanese government bond (JGB) yield fell 1.5 basis points to 2.175%, while the benchmark 10-year yield slipped 3 basis points to 2.76%. The 30-year JGB yield declined 4.5 basis points to 3.895%.

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The Ministry of Finance is scheduled to announce the results of its five-year bond auction later in the day. According to Reuters, investors expect the auction to attract decent demand as the scope for further increases in five-year yields appears limited.

Market pricing suggests that the BOJ's rate-hiking cycle could approach its conclusion by around June next year. Overnight index swaps indicate that the policy rate is expected to reach approximately 1.75% by then, Reuters reported, citing Takashi Fujiwara, lead fund manager at Resona Asset Management.

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Meanwhile, dovish BOJ policymaker Toichiro Asada pushed back against calls within the central bank's board for a near-term interest rate increase earlier in the day. He cautioned that raising rates prematurely could undermine economic growth and weigh on underlying inflation.

However, Asada's comments were largely in line with market expectations and had little impact on bond yields during the morning session, according to Reuters.

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