JGB drop in line with U.S. Treasuries on stimulus hopes

BY Reuters | TREASURY | 10/21/20 01:40 AM EDT

TOKYO, Oct 21 (Reuters) - Japanese government bonds (JGBs) dipped on Wednesday, tracking an overnight rise in U.S. Treasury yields, as hopes that the United States was nearing a deal on coronavirus relief dampened the safe-haven appeal of debt.

Benchmark 10-year JGB futures fell 0.23 point to 151.9, marking a near two-week low, with a trading volume of 26,288 lots.

The 10-year JGB yield rose 1 basis point to 0.030%, its highest level since Oct. 9.

In the super-long zone, the 20-year JGB yield rose 1 basis point to 0.405%.

Meanwhile, the 30-year JGB yield and the 40-year JGB yield climbed 2 basis points each to 0.625% and 0.650%, respectively.

At the shorter end of the curve, the two-year JGB yield edged up half a basis point to minus 0.140%, while the five-year yield gained 1 basis point to minus 0.105%.

With just two weeks until the U.S. presidential election, lawmakers moved closer to an agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill.

The Bank of Japan maintained the size of its bond purchase in its operation on Wednesday, buying one- to three-year JGBs and five- to ten-year notes worth 420 billion yen each, and 350 billion yen of three- to five-year bonds. (Reporting by Tokyo Markets Team; editing by Uttaresh.V)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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