Japan's 20-year bond yield falls sharply after strongest auction on record

Japan's 20-year government bond yield fell sharply on Tuesday after the strongest auction on record for the bonds with the same maturity lifted sentiment.

* The 20-year JGB yield fell as much as 6 basis points (bps) to 3.71%, its lowest level since September 9, after the auction outcome was announced. Yields move inversely to bond prices

* The yield was last down 4.5 bps at 3.725%


* The auction received bids worth 5.84 times the amount sold, the biggest ratio since the 20-year bonds were first sold in 1987, and higher than a ratio of 4.01 times at the previous auction last month

* Takashi Fujiwara, lead fund manager at Resona Asset Management, said growing expectations that the Bank of Japan's interest rate hikes may terminate as early as March next year are positive for the super-long sector

* "There is a view that expected inflation will likely remain stable so that the BOJ would not have to raise rates aggressively," Fujiwara said

* "The strong auction outcome suggests that many investors expect a rebound in the bond market, as they turned to risk off after the mass protest in France and the sell-off of CoreWeave stocks and bonds," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management

* The 30-year yield fell 5 bps to 3.935% and the 40-year JGB yield was down 6 bps to 4.05%

* The benchmark 10-year JGB yield rose 1.5 bps to 2.920%.