JGBs rise after US Treasury acts to bring down borrowing rates

Japanese government bonds strengthened on Thursday after the US Treasury stepped in to curb a surge in long-dated borrowing rates. Business Recorder, citing Reuters, said the step helped calm global debt markets. The benchmark 10-year yield dropped 5.5 basis points to 2.835%, while the 20-year yield fell 8.5 bps to 3.690%.

The Ministry of Finance sold roughly 2.5 trillion yen, about $15.78 billion, of 20-year bonds that day. The bid-to-cover ratio, a gauge of demand, came in at 3.98, below the July auction yet above the average of the previous 12 months. Sony Financial Group senior economist Takayuki Miyajima said in a note that the US action seems to have paused the worldwide rise in long-term yields for the time being. He added that speculation is building that Japan may also take steps to address imbalances between supply and demand.

The 40-year yield, the longest tenor, eased 9.5 bps to 4.055%, while the 30-year slipped 8.5 bps to 3.995%. The five-year yield declined 3 bps to 2.090%, retreating from a record hit earlier this week, and the two-year yield was unchanged. Earlier in the week, long-term borrowing costs in the US, Germany and Japan reached their highest levels in decades, reflecting worries over heavy government debt and inflation linked to high oil prices during the Middle East conflict.