Japan's 5-year bond yield falls ahead of auction results
TLT•Japan's five-year government bond yield fell 1.5 basis points to 2.175% ahead of an auction, while the 10-year yield slipped 3 basis points to 2.76%. The market had already priced in the Bank of Japan's rate-hike path, a fund manager said.
1. Yields fall before auction
Japan's five-year government bond yield fell 1.5 basis points to 2.175% on Thursday as investors awaited the outcome of an auction of bonds with the same maturity. The 10-year yield slipped 3 basis points to 2.76%, and the 30-year yield fell 4.5 basis points to 3.895%.
2. Rate path priced in
Resona Asset Management fund manager Takashi Fujiwara said the auction may draw decent demand because the five-year yield's upside potential is limited. Overnight index swaps indicate a rate of around 1.75% in June next year, signaling that the market has priced in the Bank of Japan's rate-hike path ending around that time, he said.
3. Policymaker comments
Dovish Bank of Japan policymaker Toichiro Asada argued that premature rate hikes could hurt growth and push down underlying inflation. Analysts said his comments were within expectations and did not move yields in the morning. The Ministry of Finance was due to announce the auction results later in the day.
