Japan Bonds Rise as 30-Year Yields Fall to 12-Week Low on SyriaWes Goodman and Mariko Ishikawa
Japanese government bonds rose, pushing 30-year yields to the lowest level in 12 weeks, as the threat of military intervention in Syria increased demand for the relative safety of the Asian nation’s debt.
The benchmark 10-year yield dropped to the lowest in more than three months. A 2.7 trillion yen ($27.3 billion) sale of two-year debt today drew bids worth 5.56 times the amount available, down from the bid-to-cover ratio of 9.27 last month that was the highest since January.
“There is a lot of uncertainty around Syria, and bonds tend to be bid as safe assets in such an environment,” said Makoto Suzuki, a senior bond strategist at Okasan Securities Co. in Tokyo.
Japan’s 10-year yield slid 1/2 basis point to 0.71 percent as of 5:14 p.m. in Tokyo, according to Japan Bond Trading Co. That was the lowest since May 10. A basis point is 0.01 percentage point.
Thirty-year yields declined to 1.745 percent, the lowest level since June 4. Twenty-year yields fell to 1.63 percent, the least since June 10. The two-year rate slid 1/2 basis point to 0.105 percent, a level unseen since April 9.
The U.S. and the U.K. said yesterday they are prepared to take military action against Syria without authorization from the United Nations Security Council, as they prepared evidence that the Middle Eastern regime used chemical weapons on its people.
Japan’s sovereign bonds have returned 1.3 percent this year compared with a 3.3 percent slide in U.S. Treasuries, based on Bloomberg World Bond Indexes. The Bank of Japan buys more than 7 trillion yen of JGBs per month to spur the economy, while Federal Reserve policy makers are debating how and when to reduce their quantitative easing program.
Japanese bonds returned 0.6 percent and Treasuries fell 0.8 percent in August, according to the Bloomberg indexes.
The results of today’s auction of the 0.1 percent notes were delayed to 1:15 p.m. from 12:45 p.m. due to a processing issue, according to the Ministry of Finance. The 5.56 bid-to-cover ratio compares with the average of 5.3 in the past five years.
“There was no impact from the delay in the results,” said Takafumi Yamawaki, the Tokyo-based chief rates strategist at JPMorgan Chase & Co., one of 23 primary dealers obliged to bid at JGB sales. “The JGB market looks solid as the BOJ purchases will continue to support demand.”