Super-long JGB yields rise from 3-week lows ahead of 40-year bond auction
By Kevin Buckland
TOKYO (Reuters) -Long-dated Japanese government bond yields climbed off three-week lows on Wednesday, with investors closely monitoring a 40-year bond auction for indications of a recovery in demand.
The 40-year JGB yield rose 3.5 basis points (bps) to 3.32% by 0200 GMT, rebounding from a sharp 26.5 bps decline to 3.285% - its lowest level since May 7 - after Reuters reported that the finance ministry is considering trimming the issuance of super-long debt in response to a recent surge in yields.
The 30-year JGB yield climbed 5 bps to 2.88% and the 20-year yield bounced 4.5 bps to 2.45%, after tumbling to approximately three-week troughs in the prior session.
The 40-year auction results are due at 0335 GMT.
"The relatively large decline in long-term interest rates yesterday may be attributed to the inherently low liquidity in the ultra-long-term zone," Mizuho analysts wrote in a client note.
"There appears to be room for further decline if additional issuance reductions actually take place and sentiment improves."
Last week, 30- and 40-year JGB yields hit record peaks at 3.185% and 3.675%, respectively, while the 20-year yield hit a multi-decade high of 2.60%.
Yields had been rising steadily for weeks, but selling pressure intensified abruptly amid growing concerns over debt levels in major developed economies, particularly Japan and the United States, and waning demand from traditional buyers of super-long JGBs, such as life insurers.
Japanese Finance Minister Katsunobu Kato reiterated on Wednesday that he is closely monitoring developments in the bond market, echoing similar remarks made the previous day.
Bank of Japan Governor Kazuo Ueda said the central bank will watch whether swings in super-long yields have a knock-on effect for shorter maturities, which have a larger impact on economic activity.
The 10-year JGB yield gained 3.5 bps to 1.495% on Wednesday, after dipping to 1.455% for the first time since May 16 in the previous session.
The five-year yield rose 3 bps to 1.03%, while the two-year yield added 1.5 bps to 0.745%.
Benchmark 10-year JGB futures fell 0.36 yen to 139.09 yen.
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