JGB yields dip as Fed's Powell softens hawkish stance

BY Reuters | ECONOMIC | 01/12/22 02:10 AM EST

TOKYO, Jan 12 (Reuters) - Japanese government bond (JGB) yields dipped on Wednesday, tracking U.S. Treasury yields lower overnight, as investors bought back debt following less hawkish comments from Federal Reserve Chair Jerome Powell.

The 10-year JGB yield fell 2.5 basis points (bps) to 0.125% and the 20-year JGB yield fell 2.5 bps to 0.505%.

Powell told a congressional hearing on his confirmation for a second term at the helm of the central bank that the economy could weather the COVID-19 surge and was ready for tighter monetary policy.

Yields on longer ended notes also fell, with the 30-year JGB yield losing one basis point to 0.705% and the 40-year JGB yield also falling one basis point to 0.745%.

Yields on short-end bonds also fell even as a government auction for five-year notes weakened. The auction received bids worth 3.34 times the securities sold, lower than a bid-cover ratio of 3.63 times at the previous auction.

The five-year yield fell 2 bps to minus 0.050% and the two-year JGB yield fell 0.5 basis point to minus 0.085%.

Benchmark 10-year JGB futures rose 0.29 point to 151.05, with a trading volume of 34,902 lots.

(Reporting by Tokyo markets team; Editing by Rashmi Aich)

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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