JGBs rally after officials hint at pension fund shift, strong auction
TLT•Strong 20-year bond sale lifts sentiment
The Ministry of Finance sold about 700 billion yen ($4.31 billion) in 20-year bonds. The bid-to-cover ratio, a measure of demand, rose to 4.52, the highest since the sale in April. The tail, another measure of demand, was 0, the lowest since an auction in 2010.
“The outcome was strong, better than forecast,” said Takuya Onozawa, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities. "The level of the yields is relatively high, which is why there was strong demand."
The 30-year yield JP30YTN=JBTC slid 18 bps to 3.725%, while the yield on the 40-year JGB JP40YTN=JBTC, Japan's longest tenor, eased 10 bps to 3.795%.
The two-year yield JP2YTN=JBTC, the one most sensitive to Bank of Japan policy rates, edged down 1 bp to 1.435%. The five-year yield JP5YTN=JBTC decreased 4.5 bps to 1.950%.
($1 = 162.4100 yen)
JGBs surge on pension fund comments and auction demand
Japanese government bonds (JGBs) surged on Tuesday, sending the 20-year yield down by the most in six months, after officials flagged possible changes to investment funds and demand increased at a long-term debt sale.
Here are a few details:
- The benchmark 10-year JGB yield JP10YTN=JBTC slid 4.5 basis points (bps) to 2.740%. The yield on the 20-year JGB JP20YTN=JBTC dropped 16.5 bps to 3.580%, set for its sharpest decline since January 21. Yields move inversely to bond prices.
- Finance Minister Satsuki Katayama said the government may consider adjusting asset allocation in Japan's massive pension funds if the investment environment changes sharply.
- Katayama also addressed the possibility of allowing JGBs to be included in tax-free investment accounts for individuals.
