Japan's 5-year bond yield steadies after firm auction outcome

Business Recorder reported that the yield on Japan's five-year government bonds leveled off on Wednesday, pulling back from its intraday top after a Ministry of Finance auction attracted solid buying interest. The yield returned to 2.34% after touching 2.35% earlier in the session, and was last 0.5 basis points higher at 2.345%. Bids equal to 3.56 times the volume sold were well above the 3.36 times averaged over the past year.

Takashi Fujiwara of Resona Asset Management credited the strong turnout partly to lower yields on French bonds, where the 10-year yield dropped to 4.8034% on Tuesday from 4.8958% at Monday's close. France has been selling bonds heavily while its government pushes a budget that is unpopular and aimed at cutting the deficit, a tough task before next year's election. Fujiwara also noted that investors have started to anticipate the close of the BOJ's rate increases, which has added to appetite for the five-year debt. He said the market sees the BOJ's final rate falling between 1.75% and 2%, with that point due in June next year.

The 10-year JGB yield eased 0.5 basis points to 2.995% after the auction. Fujiwara added that the BOJ's latest quarterly Tankan survey suggested limited upside risks to inflation expectations, which supports the case for further rate hikes.