Japan’s Key Yield Rises Above Germany First Time After AuctionChikako Mogi and Daisuke Sakai
Japan’s 10-year bond yields surpassed those of Germany for the first time, after an auction of the Asian nation’s benchmark debt met the weakest demand since July 2013.
The yield climbed seven basis points to 0.355 percent as of 4:38 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker. The price of the 0.3 percent debt due December 2024 fell 0.669 yen to 99.475. Germany’s 10-year yield was little changed at 0.32 percent.
Japan’s 10-year bonds fell the most in 20 months after the 2.4 trillion yen ($20 billion) sale had a bid-to-cover ratio of 2.68, down from 3.42 last month. The measure, a gauge of demand, had an average ratio of 3.7 for the past 10 offerings.
“Theoretically speaking, the Japanese yields rising above Germany’s should boost the relative allure of JGBs for Japanese investors,” said Naomi Muguruma, a Tokyo-based economist at Mitsubishi UFJ Morgan Stanley Securities Co. “The JGB markets are undergoing a correction after an intense rally.”
It was the biggest increase in Japan’s 10-year yields since May 28, 2013. Yields reached a record low of 0.195 percent on Jan. 20. A basis point is 0.01 percentage point.
The 20-year yield rose six basis points to 1.085 percent, while the 30-year yield gained 7 1/2 to 1.34 percent.
Last month, a gauge of 10-day bond-price volatility reached the highest level since April 2013.
“The auction result was very weak,” said Tomohisa Fujiki, chief interest-rate strategist at BNP Paribas. “Investors probably held back after seeing volatility pick up.”