JGB yields steady in thin trading; solid demand at linker auction

BY Reuters | TREASURY | 05/16/22 02:07 AM EDT

TOKYO, May 16 (Reuters) - Japanese government bond yields were steady in subdued trading on Monday as investors took a wait-and-see stance amid signs U.S. Treasury yields might have peaked.

The 10-year JGB yielded 0.24% as of 0555 GMT, unchanged from the end of last week, despite a tick down in equivalent Treasury yields to about 2.91% in Tokyo on Monday, from as high as 3.203% a week ago, a level not seen since late 2018.

Benchmark 10-year JGB futures barely moved at 149.52, with a trading volume of 9,708 lots.

However, an auction of inflation-linked 10-year JGBs was easily digested by the market.

"With longer-term worries about inflation as the backdrop, this auction result confirmed solid demand" for inflation-linked debt, said a market participant at a domestic securities company.

The 20-year JGB yield rose 0.5 basis point to 0.750%, and the 30-year yield advanced by the same amount to 1.000%.

Benchmark two- and five-year JGBs had not changed hands, and last yielded -0.060% and 0.005%, respectively. (Reporting by Tokyo markets team; Editing by Aditya Soni)

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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