Japanese government bond trading reflected calm conditions on Thursday, with market sentiment aided by Treasury gains following the Federal Reserve's rate pause. Investor demand was notably robust in the primary market, where the bid-to-cover ratio for the two-year debt auction reached 4.03. Yields across the curve saw minimal movement, though the benchmark two-year yield dipped to 1.895 percent following the debt sale. A Reuters poll suggests the Bank of Japan will hold rates steady on Friday before possibly raising them in December.
Key points
A less hawkish Federal Reserve rate pause has reduced immediate pressure on Japanese poli…: A less hawkish Federal Reserve rate pause has reduced immediate pressure on Japanese policymakers to accelerate interest rate hikes.
Economists surveyed by Reuters broadly anticipate an unchanged policy rate on Friday foll…: Economists surveyed by Reuters broadly anticipate an unchanged policy rate on Friday followed by a potential December quarter-point increase.
Solid primary auction demand indicates sustained domestic appetite for short-term soverei…: Solid primary auction demand indicates sustained domestic appetite for short-term sovereign debt despite looming monetary tightening.
Sources checked by our analysis pipeline: 1
TOKYO, Oct 29 : Japanese government bonds (JGBs) were steady on Thursday, a day before the Bank of Japan's monetary policy decision, while strong demand at an auction of 2-year notes provided support.
The market was also buoyed by gains in US Treasuries after the Federal Reserve left interest rates unchanged and gave few signals about the chances of a hike at the next meeting in December.
"The market seemed to perceive it as less hawkish than expected," said Yuhi Kawano, a market analyst at Mizuho Securities.
"Under these circumstances, it’s easy to see why the need for the Bank of Japan to raise rates at a high pace seems low, which should be supportive for the yen bond market."
• The benchmark 2-year JGB yield eased half a basis point to 1.895 per cent, reversing an earlier small rise following the auction results; yields fall when bond prices rise
• A measure of demand called the bid-to-cover ratio rose to 4.03 at the 2-year auction, from 3.89 at a sale last month
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