By Kevin Buckland and Brigid Riley
TOKYO (Reuters) – Japanese government bond yields fell from multi-month highs on Monday, mirroring a sharp retreat in their U.S. peers at the end of last week after data showed U.S. jobs growth had cooled.
The 30-year JGB yield fell 2 basis points (bps) to 1.595%, after reaching 1.63% in the previous session for the first time since mid-January. The Finance Ministry’s auction of about 900 billion yen ($6.33 billion) of the tenor on Tuesday will be closely watched as a litmus test of demand in the sector.
The 20-year yield declined 1.5 bps to 1.32%. It hit 1.355% on Friday, a level last seen at the start of February.
The 10-year JGB yield slid 2 bps to 0.62%. On Thursday it had risen to the highest since January 2014 at 0.655% as the market continued to seek an equilibrium level between the Bank of Japan’s official policy ceiling of 0.5% under yield curve control (YCC) and the new de-facto limit at 1% following last month’s surprise policy tweak.
Minutes of that meeting released in the Tokyo morning offered little in the way of fresh clues for traders.
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Equivalent U.S. Treasury yields were little changed at around 4.06% in Tokyo trading after plunging some 14 bps on Friday from a nine-month high above 4.2% reached earlier that session.
Investors are closely monitoring how the Bank of Japan conducts its bond-purchase operations for hints on a comfortable level for the 10-year yield.
The central bank’s focus thus far on buying of maturities up to 10 years may buff the attractiveness of the 30-year bonds at Tuesday’s auction, said Takafumi Yamawaki, head of Japan fixed-income research at J.P. Morgan Securities.
“The BOJ has not shown the intention to control superlong yields,” Yamawaki said, adding that on an absolute basis, “life insurers think the 30-year JGB yield at this moment is quite attractive.”
At the shorter end on Monday, two-year JGB yield fell 0.5 bp to 0.015%, while the five-year yield declined 1 bp to 0.20%.
Benchmark 10-year JGB futures closed 0.24 yen higher at 146.60, rebounding from Friday’s nearly five-month low of 146.24.
($1 = 142.0800 yen)
(Reporting by Kevin Buckland and Brigid Riley; Editing by Nivedita Bhattacharjee)