Japan's 30-year bonds rise after weak auction outcome, in line with expectations
TOKYO - Japan's 30-year government bond prices rose after an auction of the notes saw its weakest outcome in one and a half years, in line with market expectations.
The bid-to-cover ratio, a measure of demand that gauges the number of bids against the amount of securities on offer, fell to 2.921, the worst since December 2023, and was down from 3.074 at the prior sale in May.
The auction followed a weak outcome of the 40-year bond sale last week, and was a gauge for demand in so-called super-long bonds, which saw heavy sell-offs in May.
"The weak outcome signalled the market has not recovered from the weakness, with volatilities in yields remaining high," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
The poor auction results would add pressure on the finance ministry to reduce the issuance of bonds with super-long maturities.
Such expectations rose after Reuters reported last week the Ministry of Finance is considering reducing its sales of super-long bonds.
The ministry could reduce the sale amounts as early as July, after hearing opinions from primary dealers at a meeting scheduled later this month, strategists said.
Sentiment will be weak as long as the scale of expected cuts remains unclear, they said.
The 30-year JGB yield was last down 7 basis points at 2.875%, extending the decline of 5.5 bps before the auction. Bond yields move inversely to prices.
"The yields fell so much ahead of the auction because some investors bought the 30-year bonds, expecting that the auction outcome would be good," Inadome said.
The 10-year JGB yield fell 3.5 bps to 1.465% and the five-year yield fell 2 bps to 1.02%.
(Reporting by Junko Fujita, Kevin Buckland and Rocky Swift; Editing by Mrigank Dhaniwala)
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