Japan bonds steady ahead of BOJ decision; strong auction lends support
TLT•Japanese government bonds were steady ahead of Friday’s Bank of Japan decision, as strong demand at a two-year note auction and gains in U.S. Treasuries supported the market. The two-year yield eased 0.5 basis point to 1.895%, and the auction’s bid-to-cover ratio rose to 4.03 from 3.89 last month.
1. Auction supports bonds
Japanese government bonds were steady on Thursday, a day before the Bank of Japan’s monetary policy decision. Demand at an auction of two-year notes supported the market, while gains in U.S. Treasuries followed the Federal Reserve’s decision to leave interest rates unchanged.
2. Yields edge unevenly
The two-year JGB yield eased half a basis point to 1.895%, reversing an earlier small rise after the auction. The bid-to-cover ratio increased to 4.03 from 3.89 at the previous month’s sale. The 10-year yield rose 0.5 basis point to 2.83%, the five-year yield was flat at 2.265%, and the 30-year yield edged up half a basis point to 3.88%.
3. BOJ outlook
A market analyst said investors appeared to view the Fed’s decision as less hawkish than expected, adding that this made a rapid pace of BOJ rate increases seem less necessary. A poll of economists showed expectations that the BOJ would leave rates unchanged on Friday and raise them by a quarter-point in December.
