Japan's 10-year bond yield jumps ahead of auctions

BY Reuters | TREASURY | 12/01/23 12:54 AM EST

TOKYO, Dec 1 (Reuters) - Japan's 10-year government bond yield jumped on Friday, tracking U.S. Treasury yields higher, as investors braced for auctions for 10- and 30-year bonds next week.

The 10-year JGB yield rose as much as 5.5 basis points (bps) to 0.715% earlier in the session, before trading last at 0.705%, up 3.5 bps.

"The yield tracked U.S. Treasury peers but also investors adjusted their positions ahead of the auction for 10-year bonds," said Ataru Okumura, senior strategist at SMBC Nikko Securities.

U.S. Treasury yields climbed overnight even after economic data provided more evidence that the Federal Reserve could end hiking interest rates.

Japan's finance ministry is planning to auction about 2.7 trillion yen ($18.23 billion) of 10-year bonds on Tuesday and some 900 billion yen of 30-year bonds on Thursday.

The 20-year JGB yield rose 1.5 bps to 1.445% and the 30-year JGB yield climbed 2 bps to 1.680%.

"The rises in yields is a sign that investors have finished covering their short positions. They started selling bonds when prices became expensive," said Okumura.

The Bank of Japan on Thursday kept the offer amounts of its regular JGB buying for the next three months unchanged across the curve.

The BOJ had reduced offer amounts of its bond buying for some maturities twice last month as the yields tracked sharp declines on U.S. yields. But it kept the amounts for the latest offer on Wednesday unchanged.

The BOJ could reduce their offer amounts again in the future as its stance is to let the market control prices, said Okumura.

The 40-year JGB yield rose 1.5 bps to 1.935%.

The five-year yield rose 1 basis point to 0.265%.

The two-year JGB yield fell 1 bp to 0.040%.

The 10-year JGB futures fell 0.21 yen to 146.25.

($1 = 148.1100 yen) (Reporting by Junko Fujita; Editing by Sohini Goswami)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.