Japan's 10-year JGBs trade for 1st time in 5 days, yield gap widens

Credit: REUTERS/FLORENCE LO

By Junko Fujita

TOKYO, Oct 13 (Reuters) - Japanese 10-year government bonds traded for the first time in five sessions on Thursday, while yield spread between the 10- and 20-year bonds reached the widest in seven years.

The 20-year government bond yield JP20YTN=JBTC rose to 1.070%, its highest since December 2015. The 10-year JGB yield JP10YTN=JBTC fell 0.5 basis point to 0.245%, in its first trade since Oct. 5.

The gap between yields on the two tenors widened to 81.1 basis points (bps), the largest since May 2015.

The Bank of Japan has been aggressively keeping the 10-year yield below 0.25%, the top end of the ceiling, as it keeps an ultra-low rate policy to support the economy, going against the global tide of tightening to contain inflation.

The 10-year bonds had been untraded for four straight sessions, the first such occasion since newly issued 10-year bonds became the benchmark in 1999.

Yields on nine-year bonds JP03640067= maturing in September 2031, which are outside the BOJ's target for controlling yield movement, were last at 0.284%, indicating the upward potential for the benchmark 10-year yields.

The 30-year JGB yield JP30YTN=JBTC fell 0.5 basis point to 1.470%, after hitting a two week high in the previous session, when the government held an auction for the notes with the same maturity.

"The outcome of the auction was weak," said Ataru Okumura, strategist at SMBC Nikko Securities. "And that probably lifted demand for the notes in the secondary market from life insurers."

The 40-year JGB yield JP40YTN=JBTC fell 1 basis point to 1.690%.

The two-year JGBs were not traded and the yield JP2YTN=JBTC stayed at -0.060%, while the five-year yield JP5YTN=JBTC rose 0.5 basis point to 0.065%.

(Reporting by Junko Fujita; Editing by Kim Coghill)

((junko.fujita@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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